10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 001-37637

MIMECAST LIMITED

(Exact Name of Registrant as Specified in its Charter)

Bailiwick of Jersey	Not applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1 Finsbury Avenue London EC2M 2PF United Kingdom	EC2M 2PF
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 996-5340

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Ordinary Shares, par value $0.012 per share	MIME	The Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 28, 2021, the registrant had 65,738,818 shares of ordinary shares, $0.012 par value per share, outstanding.

SUMMARY of the Material and Other Risks Associated with Our Business

Business and Operational Risks

• Data security and integrity are critically important to our business, and breaches of our information and technology networks and unauthorized access to a customer’s data, including our recent security incident, could harm our business and operating results.

• The global COVID-19 pandemic has had, and will likely continue to have, certain negative impacts on our business, financial results and operations.

• If we are unable to attract new customers, sell additional services, features and products to our existing customers, and retain customers, our business and results of operations will be affected adversely.

• The markets in which we participate are highly competitive, and our failure to compete successfully would make it difficult for us to add and retain customers and would reduce or impede the growth of our business.

• If we are unable to effectively increase sales to large enterprises, our business, financial position and results of operations may suffer.

• Our business and results of operations may be negatively impacted by the United Kingdom’s withdrawal from the European Union.

• We must maintain successful relationships with our channel partners.

• Any serious disruptions in our services may cause us to lose revenue and market acceptance and may affect the service level commitments under our subscription agreements, which could obligate us to provide refunds.

• We have acquired, and may acquire in the future, other businesses, products or technologies, which could require significant management attention, disrupt our business, dilute shareholder value and adversely affect our results of operations.

• If we are not able to provide successful updates, enhancements and features to our technology to, among other things, keep up with emerging cyber threats and customer needs, our business could be adversely affected.

• We are subject to a number of risks associated with global sales and operations, including without limitation the recent societal unrest in South Africa.

• Our research and development efforts may not produce new services or enhancements to existing services.

• We employ third-party licensed software for use in or with our services, and the inability to maintain these licenses or errors or vulnerabilities in the software we license could result in increased costs, reduced service levels or security risks, which would adversely affect our business.

• Interruptions or performance problems associated with our information and technology infrastructure could impair the delivery of our services and harm our business.

Legal and Regulatory Risks

• Our failure to comply with evolving data privacy, data protection and cloud computing regulations, cross-border data transfer restrictions and other domestic or foreign laws and regulations may result in substantial liability and may limit the use and adoption of, or require modifications to, our products and services, all of which could reduce our revenue, harm our operating results and adversely affect our business.

• We are subject to governmental export controls and funds dealings restrictions that could impair our ability to compete in certain international markets and subject us to liability if we are not in full compliance with applicable laws.

• We may become involved in litigation that may materially adversely affect us.

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Human Capital Risks

• We are dependent on the continued services and performance of our key employees, including our co-founder.

• If we are unable to hire, retain and motivate qualified personnel, our business may be adversely impacted.

• Our recent workforce reduction may adversely affect our business.

Risks Related to Intellectual Property

• Third parties have sued us for alleged infringement of their proprietary rights.

• Failure to protect our intellectual property rights could impair our ability to protect our technology and our brand.

• Our employees may disclose our trade secrets and other proprietary information.

• Our employees or contractors may wrongfully use alleged trade secrets or confidential information of their former employers or other parties.

• The use of open source software in our offerings may expose us to additional risks, including security risks, and harm our intellectual property.

Financial Risks

• Because we recognize revenue from subscriptions for our services over the term of the agreement, downturns or upturns in new business may not be immediately reflected in our operating results and may be difficult to discern.

• We have incurred net losses in the past, and we may not be able to sustain profitability.

• Fluctuations in currency exchange rates could adversely affect our business.

• Financial covenants and other restrictions under our credit facility create default risks and reduce our flexibility.

• We must maintain the adequacy of internal controls over financial reporting.

Tax Risks

• We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, including issues related to our tax residence, allocations of our taxable income among our subsidiaries, and limitations on our use of net operating losses or tax credit carryforwards.

Risks Related to Owning Our Ordinary Shares and Our Organization in Jersey, Channel Islands

• Our share price has been and may continue to be volatile based on many factors, many of which are not within our control.

• If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

• We do not expect to pay dividends and investors should not buy our ordinary shares expecting to receive dividends.

• The rights afforded to our shareholders are governed by Jersey law. Not all rights available to shareholders under English law or U.S. law will be available to shareholders, potentially including the ability to enforce civil liabilities against us.

The summary described above should be read together with the text of the full risk factors below and in the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations. For more information on these risk factors, see Part II, Item 1A, “Risk Factors”, included in this Quarterly Report on Form 10-Q.

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Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2021 and March 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2021 and 2020	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2021 and 2020	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 6.	Exhibits	57
Signatures		61

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MIMECAST LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	As of June 30,			As of March 31,
	2021			2021
Assets
Current assets
Cash and cash equivalents	$	338,433		$	292,949
Accounts receivable, net		101,217			114,280
Deferred contract costs, net		16,952			16,165
Prepaid expenses and other current assets		21,778			20,031
Total current assets		478,380			443,425
Property and equipment, net		92,858			92,891
Operating lease right-of-use assets		122,739			128,063
Intangible assets, net		41,447			43,193
Goodwill		176,908			173,952
Deferred contract costs, net of current portion		50,853			50,086
Other assets		2,601			3,097
Total assets	$	965,786		$	934,707
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	12,576		$	10,487
Accrued expenses and other current liabilities		48,843			54,676
Deferred revenue		232,645			237,749
Current portion of finance lease obligations		50			323
Current portion of operating lease liabilities		33,237			33,447
Current portion of long-term debt		9,722			9,090
Total current liabilities		337,073			345,772
Deferred revenue, net of current portion		12,595			12,936
Operating lease liabilities		107,669			112,316
Long-term debt		92,238			94,671
Other non-current liabilities		7,527			8,143
Total liabilities		557,102			573,838
Commitments and contingencies (Note 13)
Shareholders' equity
Ordinary shares, $0.012 par value, 300,000,000 shares authorized;    65,661,585 and 64,562,222 shares issued and outstanding as of    June 30, 2021 and March 31, 2021, respectively		788			775
Additional paid-in capital		440,801			408,249
Accumulated deficit		(43,843	)		(53,915	)
Accumulated other comprehensive income		10,938			5,760
Total shareholders' equity		408,684			360,869
Total liabilities and shareholders' equity	$	965,786		$	934,707

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three months ended June 30,
	2021			2020
Revenue	$	142,549		$	115,176
Cost of revenue		33,549			28,469
Gross profit		109,000			86,707
Operating expenses
Research and development		31,486			22,802
Sales and marketing		48,262			44,043
General and administrative		17,923			17,168
Total operating expenses		97,671			84,013
Income from operations		11,329			2,694
Other income (expense)
Interest income		158			177
Interest expense		(536	)		(883	)
Foreign exchange (expense) income and other, net		(514	)		1,763
Total other income (expense), net		(892	)		1,057
Income before income taxes		10,437			3,751
Provision for income taxes		365			613
Net income	$	10,072		$	3,138
Net income per ordinary share
Basic	$	0.15		$	0.05
Diluted	$	0.15		$	0.05
Weighted-average number of ordinary shares outstanding
Basic		65,198			63,019
Diluted		66,934			64,676

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three months ended June 30,
	2021		2020
Net income	$	10,072	$	3,138
Other comprehensive income:
Change in foreign currency translation adjustment		5,178		3,900
Total other comprehensive income		5,178		3,900
Comprehensive income	$	15,250	$	7,038

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Three months ended June 30, 2021
													Accumulated
	Ordinary Shares						Additional						Other		Total
	Number of						Paid-in			Accumulated			Comprehensive		Shareholders'
	Shares			Amount			Capital			Deficit			Income		Equity
Balance as of March 31, 2021		64,562		$	775		$	408,249		$	(53,915	)	$	5,760	$	360,869
Net income		—			—			—			10,072			—		10,072
Foreign currency translation adjustment		—			—			—			—			5,178		5,178
Issuance of ordinary shares upon exercise of share options		672			8			18,959			—			—		18,967
Share-based compensation		—			—			17,396			—			—		17,396
ESPP purchase		75			1			3,373			—			—		3,374
Tax withholding on ESPP purchases and vesting of RSUs		(174	)		(2	)		(7,170	)		—			—		(7,172	)
Vesting of RSUs		527			6			(6	)		—			—		—
Balance as of June 30, 2021		65,662		$	788		$	440,801		$	(43,843	)	$	10,938	$	408,684

	Three months ended June 30, 2020
													Accumulated
	Ordinary Shares						Additional						Other			Total
	Number of						Paid-in			Accumulated			Comprehensive			Shareholders'
	Shares			Amount			Capital			Deficit			Loss			Equity
Balance as of March 31, 2020		62,792		$	754		$	325,808		$	(83,660	)	$	(10,847	)	$	232,055
Net income		—			—			—			3,138			—			3,138
Foreign currency translation adjustment		—			—			—			—			3,900			3,900
Issuance of ordinary shares upon exercise of share options		249			3			5,037			—			—			5,040
Share-based compensation		—			—			13,666			—			—			13,666
ESPP purchase		87			1			3,094			—			—			3,095
Tax withholding on ESPP purchases and vesting of RSUs		(76	)		(1	)		(2,574	)		—			—			(2,575	)
Vesting of RSUs		217			2			(2	)		—			—			—
Balance as of June 30, 2020		63,269		$	759		$	345,029		$	(80,522	)	$	(6,947	)	$	258,319

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MIMECAST LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three months ended June 30
	2021			2020
Operating activities
Net income	$	10,072		$	3,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,876			8,852
Share-based compensation expense		17,388			13,653
Amortization of deferred contract costs		4,161			2,869
Amortization of debt issuance costs		111			114
Amortization of operating lease right-of-use assets		8,330			7,111
Deferred income tax expense (benefit)		117			(178	)
Unrealized currency losses (gains) on foreign denominated transactions		83			(2,733	)
Changes in assets and liabilities:
Accounts receivable		13,935			12,405
Prepaid expenses and other current assets		(1,218	)		(497	)
Deferred contract costs		(5,403	)		(5,203	)
Other assets		405			217
Accounts payable		4,368			(2,037	)
Deferred revenue		(6,599	)		(5,645	)
Operating lease liabilities		(8,045	)		(8,221	)
Accrued expenses and other liabilities		(6,881	)		5,460
Net cash provided by operating activities		40,700			29,305
Investing activities
Purchases of property, equipment and capitalized software		(9,095	)		(10,771	)
Net cash used in investing activities		(9,095	)		(10,771	)
Financing activities
Proceeds from issuance of ordinary shares		21,926			8,135
Withholding taxes related to net share settlement of ESPP purchases and vesting of RSUs		(7,172	)		(2,575	)
Payments on debt		(1,875	)		(1,250	)
Payments on finance lease obligations		(273	)		(347	)
Net cash provided by financing activities		12,606			3,963
Effect of foreign exchange rates on cash		1,273			2,086
Net increase in cash and cash equivalents		45,484			24,583
Cash and cash equivalents at beginning of period		292,949			173,958
Cash and cash equivalents at end of period	$	338,433		$	198,541
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	426		$	763
Cash paid during the period for income taxes	$	225		$	82
Supplemental disclosure of non-cash investing and financing activities
Unpaid purchases of property, equipment and capitalized software	$	4,279		$	8,731
Operating lease right-of-use assets exchanged for lease obligations	$	2,000		$	1,004
Proceeds receivable from issuance of ordinary shares	$	415		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MIMECAST LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data, unless otherwise noted)

(unaudited)

1. Summary of Business and Significant Accounting Policies

Description of Business

Mimecast Limited (Mimecast or the Company) is a public limited company organized under the laws of the Bailiwick of Jersey on July 28, 2015 and is headquartered in London, England.

The principal activity of the Company is the provision of cloud security and risk management services for email and corporate information. The Company’s Email Security 3.0 and Cyber Resilience Extension offerings are designed to protect customers from today’s rapidly changing security environment. The Email Security 3.0 strategy addresses threats in three distinct zones: at the email perimeter (Zone 1); inside the network and the organization (Zone 2); and beyond the perimeter (Zone 3). The Company’s Cyber Resilience Extensions expand resilience to other critical elements of an organization’s digital infrastructure. The Company’s primary offerings include: email security; email continuity and sync & recover; email archiving; awareness training; web security; DMARC analyzer; CyberGraph; brand exploit protection; and threat intelligence and our API ecosystem. Mimecast operates principally in Europe, North America, Africa and Australia.

The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customer concentration, security risks, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These financial statements and notes should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2021 and related notes, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 27, 2021.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended March 31, 2021 contained in the Company’s Annual Report on Form 10-K and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and for the three months ended June 30, 2021 and 2020. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

The Company reclassified certain amounts within its condensed consolidated statement of cash flows to conform to current period presentation. The reclassifications include $0.1 million from other assets and $0.1 million from accrued expenses and other liabilities to deferred income tax benefit for the three months ended June 30, 2020. These reclassifications had no impact on the Company’s previously reported results of operations or balance sheets.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

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Use of Estimates

The preparation of financial statements in conformity with GAAP 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period.

Significant estimates relied upon in preparing these condensed consolidated financial statements include revenue recognition, variable consideration, valuation at fair value of assets acquired or sold, including intangible assets, goodwill, tangible assets, and liabilities assumed, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets, contingent liabilities, determination of incremental borrowing rates, restructuring liabilities, expensing and capitalization of research and development costs for internal-use software, the determination of the fair value of share-based awards issued, the average period of benefit associated with costs capitalized to obtain revenue contracts and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Due to the global COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of June 30, 2021. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recorded in the period in which they become known.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive income consists of net income and other comprehensive income, which includes certain changes in equity that are excluded from net income. As of June 30, 2021 and March 31, 2021, accumulated other comprehensive income is presented separately on the condensed consolidated balance sheets and consists of cumulative foreign currency translation adjustments.

Accounting Policies

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the condensed consolidated financial statements. As of June 30, 2021, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K, have not changed.

2. Revenue and Deferred Revenue

Revenue recognized during the three months ended June 30, 2021 and 2020 from amounts included in deferred revenue at the beginning of the respective periods was approximately $99.9 million and $80.8 million, respectively. Revenue recognized during the three months ended June 30, 2021 and 2020 from performance obligations satisfied or partially satisfied in previous periods was not material.

Contracted revenue as of June 30, 2021 and March 31, 2021

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that has not yet been recognized (contracted and not recognized) was $116.6 million and $117.5 million, respectively, which includes deferred revenue and non-cancellable amounts that will be invoiced and recognized as revenue in future periods and excludes contracts with an original expected length of one year or less. The Company expects 53% of contracted and not recognized revenue to be recognized over the next year, 46% in years two and three, with the remaining balance recognized thereafter.

3. Concentration of Credit Risk and Off-Balance Sheet Risk

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash, cash equivalents and investments with major financial institutions of high-credit quality. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits.

Credit risk with respect to accounts receivable is dispersed due to the Company’s large number of customers. The Company’s accounts receivable are derived from revenue earned from customers primarily located in the United States, the United Kingdom, and South Africa. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. The Company estimates credit losses at the reporting date resulting from the inability of its customers to make required payments, including its historical experience of actual losses and the aging of such receivables. These receivables have been pooled by shared risk characteristics. Based on known information the Company may also establish specific allowances for customers in an adverse financial condition or adjust its expectations of changes in conditions that may impact the collectability of outstanding receivables. Credit losses historically have not been significant and the Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. The Company will continue to actively monitor the impact of the global COVID-19 pandemic on expected credit losses. As of June 30, 2021 and March 31, 2021, no individual customer represented more than 10% of the Company’s accounts receivable. During the three months ended June 30, 2021 and 2020, no individual customer represented more than 10% of the Company’s revenue.

When investments are held the Company diversifies its investment portfolio by investing in multiple types of investment-grade securities and attempts to mitigate the risk of loss by using a third-party investment manager. As of June 30, 2021 and March 31, 2021, the Company did not hold any investments.

4. Cash, Cash Equivalents and Investments

The Company considers all highly liquid instruments purchased with an original maturity date of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks, amounts held in interest-bearing money market funds and investments with maturities of 90 days or less from the date of purchase. Cash equivalents are carried at cost, which approximates their fair market value. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their stated maturities as well as the time period the Company intends to hold such securities. The Company determines the appropriate classification of investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company adjusts the cost of investments for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income in the condensed consolidated statements of operations. As of June 30, 2021 and March 31, 2021, cash and cash equivalents of $338.4 million and $292.9 million, respectively, were carried at amortized cost, which approximates their market value.

5. Fair Value of Financial Instruments

The Company’s financial instruments include cash, cash equivalents, investments, accounts receivable, accounts payable, accrued expenses and borrowings under the Company’s long-term debt arrangements. The carrying amount of the Company’s long-term debt arrangements approximates its fair values due to the interest rates the Company believes it could obtain for arrangements with similar terms. The carrying amount of the remainder of the Company’s financial instruments approximated their fair values as of June 30, 2021 and March 31, 2021, due to the short-term nature of those instruments.

The Company has evaluated the estimated fair value of financial instruments using available market information. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.

Fair values determined using “Level 1 inputs” utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Fair values determined using “Level 2 inputs” utilize quoted prices that are directly or indirectly observable. Fair values determined using “Level 3 inputs” utilize unobservable inputs for determining fair values of assets or liabilities that reflect an entity's own assumptions in pricing assets or liabilities. As of June 30, 2021 and March 31, 2021, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities and did not elect the fair value option for any financial assets and liabilities transacted in the three months ended June 30, 2021 and the year ended March 31, 2021.

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The following table summarizes financial assets measured and recorded at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of June 30, 2021 and March 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	June 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,808

	March 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,366

6. Leases

The Company has operating leases for data centers and facilities and finance leases for certain equipment. The leases have remaining lease terms of less than one year to 8 years, some of which include options to extend the leases for up to 10 years. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. Variable costs, which are based on actual usage, are not included in the measurement of right-of-use assets (ROUA) and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs. Amortization expense of the ROUA for finance leases is recognized on a straight-line basis over the lease term and interest expense for finance leases is recognized based on the effective interest method using an incremental borrowing rate.

The components of lease expense were as follows:

	Three months ended June 30,
	2021		2020
Short-term lease cost	$	26	$	67
Variable lease cost		1,411		1,743
Operating lease cost		9,946		8,377
Finance lease cost:
Amortization of lease assets		250		250
Interest on lease liabilities		3		16
Total finance lease cost	$	253	$	266

Supplemental cash flow information related to leases was as follows:

	Three months ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	9,672	$	9,637
Operating cash outflows from finance leases	$	3	$	20
Financing cash outflows from finance leases	$	273	$	347

Weighted-average remaining lease term and discount rate:

	As of June 30,			As of March 31,
	2021			2021
Weighted-average remaining lease term (in years)
Operating leases		5.58			5.76
Finance leases		0.39			0.35
Weighted-average discount rate
Operating leases		4.57	%		4.58	%
Finance leases		4.83	%		4.83	%

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Maturities of lease liabilities as of June 30, 2021 were as follows:

Year Ending March 31,	Operating Leases			Finance Leases
Remainder of 2022	$	30,453		$	51
2023		32,842			—
2024		24,023			—
2025		22,095			—
2026		17,558			—
Thereafter		32,515			—
Total lease payments		159,486			51
Less: imputed interest		(18,580	)		(1	)
Total lease liabilities	$	140,906		$	50

As of June 30, 2021, the Company had additional leases with future lease payments of $8.9 million, the terms of which have not yet commenced. These leases are expected to commence in the current fiscal year with lease terms of approximately five years.

7. Internal-use Software Costs

Software Development Costs

Costs incurred to develop software applications used in the Company’s SaaS platform consist of certain direct costs of materials and services incurred in developing or obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. Qualified costs incurred during the operating stage of the Company’s software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs incurred for maintenance of, and minor upgrades and enhancements to, internal-use software are expensed as incurred. During the three months ended June 30, 2021 and 2020, the Company believes the substantial majority of its development efforts were either in the preliminary project stage of development or in the operation stage (post-implementation), and accordingly, no costs have been capitalized during these periods. These costs are included in the accompanying condensed consolidated statements of operations as research and development expense.

Implementation Costs on Cloud-computing Arrangements

As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized implementation costs related to hosting arrangements that were incurred during the application development stage were $2.7 million and $2.9 million, respectively. These capitalized implementation costs will be amortized over the expected term of the arrangement and are amortized in the same line item in the condensed consolidated statements of operations as the expense for fees for the associated hosting arrangement.

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8. Net Income Per Ordinary Share

The Company calculates basic and diluted net income per ordinary share by dividing net income by the weighted-average number of ordinary shares outstanding during the period.

The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except per share data):

	Three months ended June 30,
	2021		2020
Numerator:
Net income	$	10,072	$	3,138
Denominator:
Weighted-average number of ordinary shares used in    computing net income per share applicable    to ordinary shareholders – basic		65,198		63,019
Dilutive effect of share equivalents resulting from    share options, RSUs and ESPP shares		1,736		1,657
Weighted-average number of ordinary shares used in    computing net income per share – diluted		66,934		64,676
Net income per share applicable to ordinary    shareholders:
Basic	$	0.15	$	0.05
Diluted	$	0.15	$	0.05

The following potentially dilutive ordinary share equivalents have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive for the periods presented (in thousands):

	Three months ended June 30,
	2021		2020
Share options outstanding		2,554		4,406
Unvested RSUs		131		520
ESPP shares		72		85

9. Share-Based Compensation

For the three months ended June 30, 2021 and 2020, all grants of share-based awards have been made under the Mimecast Limited 2015 Share Option and Incentive Plan (the 2015 Plan) and the 2015 Employee Share Purchase Plan (the ESPP). Additionally, the Company has two pre-IPO share-based compensation plans including the Mimecast Limited 2010 EMI Share Option Scheme (the 2010 Plan), and the Mimecast Limited Approved Share Option Plan (the Approved Plan) (the 2010 Plan and the Approved Plan, collectively, the Historical Plans). Subsequent to November 19, 2015, the IPO date, no further grants under the Historical Plans were permitted.

The 2015 Plan allows the compensation committee of the board of directors to make equity-based incentive awards to the Company’s officers, employees, non-employee directors and consultants. Initially a total of 5.5 million ordinary shares were reserved for the issuance of awards under the 2015 Plan. This number is subject to adjustment in the event of a share split, share dividend or other change in our capitalization. The 2015 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1st by 5% of the outstanding number of ordinary shares on the immediately preceding December 31 or such lesser number of shares as determined by the board of directors.

Under the 2015 Plan, the share option price may not be less than the fair market value of the ordinary shares on the date of grant and the term of each share option may not exceed 10 years from the date of grant. Share options typically vest over 4 years, but vesting provisions can vary based on the discretion of the board of directors. The Company settles share option exercises and RSU releases under the 2015 Plan through newly issued shares. The Company’s ordinary shares underlying any awards that are forfeited, canceled, withheld upon exercise of an option, or settlement of an award to cover the exercise price or tax withholding, or otherwise terminated other than by exercise will be added back to the shares available for issuance under the 2015 Plan.

Initially, a total of 1.1 million shares of the Company's ordinary shares were reserved for future issuance under the ESPP. This number is subject to change in the event of a share split, share dividend or other change in capitalization. The ESPP may be terminated or amended by the board of directors at any time.

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The ESPP permits eligible employees to purchase shares by authorizing payroll deductions from 1% to 10% of his or her eligible compensation during each six-month offering period, which starts on the first business day in January and July each year. Unless an employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares on the last day of the offering period at a price equal to 85% of the fair market value of the shares on the first business day or last business day of the offering period, whichever is lower.

Share Options

The fair value of each share option issued under the 2015 Plan was estimated using the Black-Scholes option-pricing model that used the following weighted-average assumptions:

	Three months ended June 30,
	2021			2020
Expected term (in years)		6.1			6.1
Risk-free interest rate		1.4	%		0.6	%
Expected volatility		46.7	%		44.6	%
Expected dividend yield		—	%		—	%
Grant date fair value per ordinary share	$	41.55		$	33.43

The weighted-average per share fair value of options granted to employees during the three months ended June 30, 2021 and 2020 was $19.10 and $14.31, respectively. As of June 30, 2021, the number of options and awards available for future grant under the 2015 Plan was 9,600,728.

Share option activity under the 2015 Plan and the Historical Plans for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of March 31, 2021		5,322,599		$	34.13		6.81	$	43,683
Options granted		718,423		$	41.55
Options exercised		(672,024	)	$	28.23
Options forfeited and cancelled		(228,711	)	$	39.98
Outstanding as of June 30, 2021		5,140,287		$	35.68		7.33	$	89,286
Exercisable as of June 30, 2021		2,620,341		$	30.72		6.33	$	58,510

For the three months ended June 30, 2021 and 2020, the total intrinsic value of options exercised was $13.7 million and $5.4 million, respectively. For the three months ended June 30, 2021 and 2020, total cash proceeds from option exercises was $18.6 million and $5.0 million, respectively.

As of June 30, 2021, there was approximately $40.0 million of unrecognized share-based compensation related to unvested share options, which is expected to be recognized over a weighted-average period of 2.58 years.

RSUs

The Company grants RSUs to its non-employee directors and its employees. Non-employee directors receive an initial RSU grant upon joining the board of directors that vests over three years and an annual grant each year thereafter that vests fully on the one-year anniversary of the grant date. RSUs granted to employees generally vest in four equal annual installments.

RSU activity under the 2015 Plan for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Grant Date Fair Value		Intrinsic Value (in thousands)
Unvested RSUs as of March 31, 2021		2,630,359		$	38.62	$	105,767
RSUs granted		1,609,373		$	41.17
RSUs vested		(526,561	)	$	37.10
RSUs forfeited		(325,680	)	$	38.99
Unvested RSUs as of June 30, 2021		3,387,491		$	40.03	$	179,706

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As of June 30, 2021, there was approximately $121.0 million of unrecognized share-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 3.19 years.

ESPP

In the three months ended June 30, 2021 and 2020, the Company recognized $0.5 million and $0.5 million of share-based compensation expense under the ESPP, respectively. In the three months ended June 30, 2021 and 2020, total cash proceeds from shares purchased under the ESPP were $3.4 million and $3.1 million, respectively.

As of June 30, 2021, there were 0.5 million shares of the Company's ordinary shares available for future issuance under the ESPP.

Share-based compensation expense recognized under the 2015 Plan, Historical Plans and ESPP in the accompanying condensed consolidated statements of operations was as follows:

	Three months ended June 30,
	2021		2020
Cost of revenue	$	1,507	$	1,125
Research and development		6,462		3,884
Sales and marketing		5,084		4,437
General and administrative		4,335		4,207
Total share-based compensation expense	$	17,388	$	13,653

10. Acquisitions

The following acquisition has been accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company has recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition dates.

Fiscal 2021 Acquisition

eTorch Inc.

On July 29, 2020, the Company acquired eTorch Inc. (MessageControl), a company incorporated under the laws of the State of Delaware, for cash consideration of approximately $17.0 million, net of cash acquired of $0.4 million. MessageControl is a messaging security provider with solutions designed to help stop social engineering and human identity attacks with the use of machine learning technology.

The purchase price allocation primarily consisted of $3.8 million of identifiable intangible assets and approximately $14.1 million of goodwill that is not deductible for tax purposes. The identifiable intangible assets primarily include developed technology of $3.5 million, customer relationships of $0.2 million, and patent licenses of $0.1 million, with estimated useful lives of 9.7 years, 6.7 years, and 5.0 years respectively. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce.

The Company has not presented pro forma results of operations for the MessageControl acquisition because it is not material to the Company's condensed consolidated results of operations, financial position, or cash flows.

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11. Goodwill and Intangible Assets

The following is a rollforward of the Company’s goodwill balance:

	Three months ended June 30,
	2021
Beginning balance	$	173,952
Effect of foreign exchange rates		2,956
Ending balance	$	176,908

Purchased intangible assets consisted of the following: 

	Weighted-
	Average		June 30, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,887	$	(10,387	)	$	29,500
Customer relationships		4		997		(362	)		635
Capitalized software and other (1) (2)		3		25,414		(14,102	)		11,312
			$	66,298	$	(24,851	)	$	41,447

	Weighted-
	Average		March 31, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,180	$	(9,114	)	$	30,066
Customer relationships		4		984		(318	)		666
Capitalized software and other (1) (2)		3		25,161		(12,700	)		12,461
			$	65,325	$	(22,132	)	$	43,193

(1) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $2.0 million and $2.1 million, respectively, of costs capitalized related to video production costs.

(2) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $0.3 million and $0.3 million of costs capitalized related to IP addresses.

For the three months ended June 30, 2021 and 2020, the Company recorded amortization expense of $2.4 million and $2.1 million, respectively. Amortization relating to developed technology and capitalized software was recorded within cost of revenue and amortization of customer relationships was recorded within sales and marketing expenses.  

Future estimated amortization expense of intangible assets as of June 30, 2021, is as follows:

	Purchased Intangible Assets		Capitalized Software
Remainder of 2022	$	3,430	$	3,778
2023		4,573		3,876
2024		4,511		2,101
2025		4,433		1,130
2026		4,355		358
Thereafter		8,833		69
Total	$	30,135	$	11,312

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12. Debt

In July 2018, the Company entered into a credit agreement (the Credit Agreement) that provided the Company with a $100.0 million senior secured term loan (the Term Loan) and a $50.0 million senior secured revolving credit facility (the Revolving Facility). In June 2020, the Credit Agreement was amended to permit the Company to issue letters of credit in certain additional foreign currencies beyond the U.S. dollar and the British pound (as amended, the Credit Agreement, the Term Loan and the Revolving Facility are referred to herein as the Credit Facility). The term of the Credit Facility is five years, maturing on July 23, 2023. As of June 30, 2021 and March 31, 2021, the effective interest rate under the Credit Facility was LIBOR plus 1.375%.

The Credit Facility requires the Company to maintain compliance with certain debt covenants, all of which the Company was in compliance with as of June 30, 2021.

As of June 30, 2021 and March 31, 2021, the Company had $85.0 million and $86.9 million, respectively, outstanding on the Term Loan and had $17.5 million outstanding borrowings under the Revolving Facility. As of June 30, 2021 and March 31, 2021, total availability under the Revolving Facility was reduced by outstanding letters of credit of $2.2 million. As of June 30, 2021 and March 31, 2021, total availability under the Revolving Facility was $30.3 million. Future minimum principal payment obligations under the Term Loan and Revolving Facility are as follows:

Fiscal Year Ending March 31,	Debt
Remainder of 2022	$	7,500
2023		10,000
2024		85,000
Total minimum debt payments		102,500
Less: Debt issuance costs		(540	)
Less: Current portion of long-term debt		(9,722	)
Long-term debt	$	92,238

As of June 30, 2021 and March 31, 2021, the balance of debt issuance costs recorded as a reduction of debt was $0.5 million and $0.6 million, respectively. As of June 30, 2021 and March 31, 2021, the balance of debt issuance costs recorded in other assets was $0.3 million. For the three months ended June 30, 2021 and 2020, total interest expense under the Credit Facility was $0.4 million and $0.7 million, respectively.

13. Commitments and Contingencies

Litigation

On September 10, 2019, ZapFraud, Inc. (ZapFraud), filed a complaint in the U.S. District Court for the District of Delaware against the Company’s wholly owned subsidiaries, Mimecast North America, Inc., Mimecast Services Limited and Mimecast UK Limited. The complaint alleges that certain elements of the Company’s email security technology infringe a patent held by ZapFraud.  ZapFraud seeks an award for damages in an unspecified amount, attorney’s fees and injunctive relief. On November 22, 2019, the Company filed a Motion to Dismiss for Failure to State a Claim. On April 24, 2020, ZapFraud amended its complaint by alleging that the Company’s email security technology infringes an additional patent that was recently issued to ZapFraud. On May 22, 2020, the Company filed a revised Motion to Dismiss for Failure to State a Claim that responds to ZapFraud’s amended complaint. On September 18, 2020, the court held a hearing on the motion and on November 20, 2020 the magistrate judge issued a recommendation that the court grant the Company’s motion. On December 11, 2020, ZapFraud filed objections to the magistrate judge’s recommendation and the Company responded to those objections on January 4, 2021. On March 25, 2021, the court adopted the recommendation of the magistrate judge, and granted the Company’s motion to dismiss. There are no pending motions and no appeal has been filed. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and potential settlement costs, diversion of management resources and other factors.

From time to time, the Company may be involved in legal proceedings and subject to claims in the ordinary course of business. Although the results of these proceedings and claims cannot be predicted with certainty, the Company does not believe the ultimate cost to resolve these matters would individually, or taken together, have a material adverse effect on the Company’s business, operating results, cash flows or financial condition. Regardless of the outcome, such proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

15

Except as described above, the Company was not subject to any material legal proceedings during the three months ended June 30, 2021 and 2020, and, to the best of its knowledge, except as described above, no material legal proceedings are currently pending or threatened.

Indemnification

In the ordinary course of business, the Company provides indemnifications of varying scope and terms to customers, business partners, vendors, lessors, directors, officers, employees, and other parties with respect to certain matters. Indemnification may include losses from intellectual property infringement claims made by third parties, the Company’s breach of certain agreements, and other liabilities relating to or arising from the Company’s acts or omissions. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular indemnification. Based on historical experience and information known as of June 30, 2021 and March 31, 2021, the Company has not incurred any costs for the above indemnities.

In certain circumstances, the Company warrants that its services will perform in all material respects in accordance with its standard published specification documentation in effect at the time of delivery of the services to the customer for the term of the agreement. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial.

Security Incident

In January 2021, the Company became aware of a security incident later determined to be conducted by the same sophisticated threat actor responsible for the SolarWinds supply chain attack. The Company immediately launched an internal forensic investigation. The investigation was supported by leading third-party forensics and cyber incident response experts at Mandiant, a division of FireEye, Inc., and in coordination with law enforcement to aid their investigation into this threat actor. During the investigation, the Company learned that the threat actor used the SolarWinds supply-chain compromise to gain access to part of its production grid environment. Using this entry point, the threat actor accessed certain Mimecast-issued certificates and related customer server connection information. The threat actor also accessed a subset of email addresses and other contact information, as well as encrypted and/or hashed and salted credentials. In addition, the threat actor accessed and downloaded a limited number of the Company’s source code repositories, but the Company found no evidence of any modifications to its source code nor does it believe there was any impact on its products. As the investigation progressed, the Company issued a series of advisories to affected customers, including recommended precautionary steps to mitigate risk and, in some cases, to address regulatory requirements. The forensic investigation was completed in March 2021 and the Company has eliminated the threat actor’s access to its environment. The Company has taken a number of actions to prevent future access to its environment and will continue to monitor for threats and take precautionary steps as needed.

The Company is subject to risk and significant uncertainties as a result of this security incident, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. While the investigation is complete, there can be no assurance as to what the overall impact of these events will be. These types of events often have cascading impacts that unfold over time and may result in a loss of revenue, a diminution of the Company’s business prospects and incremental costs, including costs associated with litigation or investigations by regulatory authorities, any of which may adversely impact the Company’s financial results.  

The Company has incurred and expects to incur significant costs related to the security incident. For the year ended March 31, 2021, the Company recorded $0.8 million of pre-tax expenses related to the security incident, net of anticipated insurance recoveries. For the three months ended June 30, 2021, expenses related to the security incident were not material. Expenses include costs of the forensic investigation, remediation costs, and legal and other professional services. It is also expected that the Company will continue to incur costs related to its response, remediation, and investigatory efforts relating to this security incident. While the Company has cyber insurance coverage, the amount of such insurance may be insufficient to compensate for any expenses or losses that may result from the security incident or the insurance carrier may refuse to reimburse the Company for certain costs under the terms of the policy. The full scope of the costs and related impacts of the security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

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14. Restructuring

Fiscal 2021 Restructuring

On January 28, 2021, the Board of Directors of the Company approved a restructuring plan designed to align the Company’s resources with its strategy. The restructuring plan, which included a reduction of the Company’s workforce by approximately 4%, permitted the Company to increase investment in strategic growth areas. During the year ended March 31, 2021, the Company recognized total pre-tax restructuring charges of $3.3 million, consisting of $3.7 million of severance and other one-time termination benefits, and other restructuring related costs, partially offset by $0.4 million of other adjustments. These charges were primarily cash-based and were recognized in the fourth quarter of fiscal 2021 in Restructuring in the consolidated statements of operations. Restructuring charges during the three months ended June 30, 2021 were not material. The actions associated with the restructuring plan are expected to be completed by the end of the second quarter of fiscal 2022 and the Company does not expect any material costs to be incurred in fiscal 2022.

The following is a rollforward of the Company’s restructuring liability balance:

	Severance and related costs
Balance as of March 31, 2021	$	398
Cash payments		(297	)
Balance as of June 30, 2021	$	101

15. Segment and Geographic Information

Geographic Data

The Company allocates, for the purpose of geographic data reporting, its revenue based upon the location of the contracting subsidiary. Total revenue by geographic area was as follows:

	Three months ended June 30,
	2021		2020
United States	$	70,916	$	60,747
United Kingdom		40,343		33,090
South Africa		15,402		11,175
Other		15,888		10,164
Total revenue	$	142,549	$	115,176

Property and equipment, net, by geographic location consists of the following:

	As of June 30,		As of March 31,
	2021		2021
United States	$	40,753	$	40,129
United Kingdom		28,233		28,892
South Africa		7,682		7,942
Other		16,190		15,928
Total	$	92,858	$	92,891

16. Income Taxes

The provision for income taxes for the three months ended June 30, 2021 and 2020 was $0.4 million and $0.6 million, respectively, on income before income taxes of $10.4 million and $3.8 million, respectively.

The provision for income taxes for the three months ended June 30, 2021 was primarily attributable to the provision recorded on the earnings of the Company’s profitable entities, partially offset by discrete tax benefits of $1.3 million related to excess tax benefits on share-based compensation realized by U.S. and U.K. employees.

The provision for income taxes for the three months ended June 30, 2020 was primarily attributable to the tax provision recorded on the earnings of the Company’s profitable entities, partially offset by the discrete tax benefit of $0.4 million related to excess tax benefits on non-qualified share option exercises by U.S. employees.

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In assessing the Company’s ability to realize its net deferred tax assets, the Company considered various factors including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations to determine whether it is more likely than not that some portion or all of its net deferred tax assets will not be realized. Based upon these factors, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its net deferred tax assets as of June 30, 2021.

During the first quarter of fiscal 2022, the Finance Act 2021 (the Act) was enacted in the United Kingdom. The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021. The effects on the Company’s existing deferred tax balances will be immaterial as a result of the valuation allowance maintained against the Company’s U.K. net deferred tax assets

During the three months ended June 30, 2021, the Company did not have a material change to the Company’s liabilities for uncertain tax positions. As of June 30, 2021, the Company did not have any material uncertain tax positions that would impact the effective tax rate if recognized. Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying condensed consolidated statements of operations. As of June 30, 2021 and March 31, 2021, accrued interest or penalties related to uncertain tax positions were immaterial.

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

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended March 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on May 27, 2021. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. In particular, statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, but not limited to, statements concerning our strategy and operational and growth initiatives, the impacts of the COVID-19 pandemic and related market and economic conditions on our business, results of operations and financial condition, fluctuations in foreign exchange rates, the security of our network, products and services, statements regarding the recently disclosed security incident and our current understanding of the identity and likely targets of the sophisticated threat actor, the scope and impact of the attack, and the results to date of our investigation, are forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and set forth in our other SEC filings, including our Annual Report on Form 10-K filed with the SEC on May 27, 2021. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a leading global provider of next generation cloud security and risk management services for email and corporate information. Our integrated suite of proprietary cloud services protects customers of all sizes from the significant business and data security risks they are exposed to through their email and other corporate systems. Our Email Security 3.0 and Cyber Resilience Extension offerings are designed to protect customers from today’s rapidly changing security environment.  

We developed our proprietary cloud architecture to offer customers a comprehensive cyber resilience strategy. Our Email Security 3.0 strategy addresses threats in three distinct zones: at the email perimeter (Zone 1); inside the network and the organization (Zone 2); and beyond the perimeter (Zone 3). Additionally, our Cyber Resilience Extensions expand resilience to other critical elements of an organization’s digital infrastructure. Our primary offerings include: email security; email continuity and sync & recover; email archiving; awareness training; web security; DMARC analyzer; CyberGraph; brand exploit protection; and threat intelligence and our API ecosystem.

We operate our business as a software-as-a-service, or SaaS, model with renewable annual subscriptions. Customers enter into annual and multi-year contracts to utilize various components of our services. Our subscription fee includes the use of the selected service and technical support. We believe our technology, subscription-based model, and customer support have led to our high net revenue retention rate, which has helped us drive our strong revenue growth. We have historically experienced significant revenue growth from our existing customer base as they renew our services and purchase additional products.

We market and sell our services to organizations of all sizes across a broad range of industries. As of June 30, 2021, we provided our services to approximately 40,600 customers and protected millions of their employees across the world. We generate sales through our network of channel partners as well as through our direct sales force. Our growth and future success depend on our ability to expand our customer base, sell additional services to our existing customers, and retain our customers.

In the three months ended June 30, 2021, we generated 50% of our revenue outside of the United States, with 28% generated from the United Kingdom, 11% from South Africa and 11% from the rest of the world. In the three months ended June 30, 2020, we generated 47% of our revenue outside of the United States, with 29% generated from the United Kingdom, 10% from South Africa and 9% from the rest of the world. Our most significant growth market is the United States. We also believe that there is a large opportunity in our other existing markets. We intend to make significant investments in sales and marketing to continue expanding our customer base in our target markets.

We were founded in 2003 in the United Kingdom with a mission to make email safer and better, and to transform the way organizations protect, store and access their email and corporate information. Our Mimecast Email Security 3.0 offerings include Mimecast Email Security, Mimecast Targeted Threat Protection, Awareness Training, Internal Email Protect, DMARC Analyzer, Brand Exploit Protect, and CyberGraph. Our CyberGraph offering was launched in June of fiscal 2022. Our Cyber Resilience Extensions include Mimecast Enterprise Information Archiving, Mimecast Email Continuity, including Sync & Recover, Mimecast

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Web Security that provides a Domain Name System, or DNS, solution alongside our core email offerings, Mimecast Secure Messaging, Mimecast Privacy Pack, and Mimecast Large File Send.

Recent Developments

Global Covid-19 Pandemic. The global COVID-19 pandemic continues to evolve, and to date has led to the implementation of various responses, including global government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures. These efforts have caused significant societal and economic disruption worldwide, including in all of the regions in which we operate our business and sell our products and services. COVID-19 infection rates declined somewhat during the late spring and summer of 2020 but increased dramatically in the fall and early winter of 2020 in many locations, which caused governments to reinstate, or consider reinstating, some restrictions. The widespread distribution of effective vaccines and continued containment efforts have helped substantially to stabilize infection rates, but, more recently, the rise in variants of the original virus has led to localized outbreaks in many locations, including in many of the countries in which we operate.

We remain committed to supporting our employees, customers and partners, and their communities during the pandemic. As a result of the COVID-19 pandemic we took a number of actions, which included: (i) instituting a closure of all of our global offices, including our global headquarters in London, United Kingdom and our offices in the United States, and shifting to a remote working environment for all of our employees; (ii) implementing a travel ban, (iii) cancelling or shifting to virtual-only customer, industry and employee events; and (iv) establishing an employee support fund to offset the impact of the pandemic on our more vulnerable employees. The expected duration of these actions is uncertain. More recently, we have opened some of our smaller global offices on a significantly limited basis and in accordance with government requirements and plan to do the same at our two primary offices located in London, United Kingdom and Lexington, Massachusetts in the summer of 2021. We expect, however, that the transition back to normal operations will in any event take significant time, perhaps several months.

We believe that the global COVID-19 pandemic and the resulting societal and economic disruption has negatively impacted and will continue to negatively impact our business and results of operations in a number of ways. Demand for our products and services has been and may continue to be negatively impacted by a decline in the rate of IT spending and a delay in purchasing decisions as IT and security staff focus on addressing the disruption to their businesses, which may impact sales to prospects and existing customers and increase customer attrition. Additionally, the global COVID-19 pandemic and the governmental and economic responses have impacted some industries, such as travel, hospitality and retail, more significantly than others. Our global sales and marketing operations have been disrupted as we have moved to a remote working environment and canceled many customer and industry events. Some customers have requested extended payment terms, have reduced the number of seats that they purchase, or have not increased the number of seats as they historically have, and we expect that these trends will continue, or potentially accelerate if the economy worsens. The economic disruption may also negatively impact the collectability of our accounts receivables as customers experience extreme distress. We have been closely monitoring the impact of the global COVID-19 pandemic on all aspects of our business, including how it will impact our operations, and we may take further precautionary and preemptive actions as may be required by the evolving circumstances. At the current time, the extent to which the global COVID-19 pandemic may affect our business, results of operations and financial condition is uncertain. See Part II, Item 1A, “Risk Factors – The global COVID-19 pandemic, including the related containment efforts, has had, and will likely continue to have, certain negative impacts on our business and operations, and we are unable to predict with certainty the extent to which it may continue to adversely affect our business, results of operations and financial condition.”

Security Incident. In January 2021, we became aware of a security incident later determined to be conducted by the same sophisticated threat actor responsible for the SolarWinds supply chain attack. We immediately launched an internal forensic investigation. Our investigation was supported by leading third-party forensics and cyber incident response experts at Mandiant, a division of FireEye, Inc., and in coordination with law enforcement to aid their investigation into this threat actor. During our investigation, we learned that the threat actor used the SolarWinds supply-chain compromise to gain access to part of our production grid environment. Using this entry point, the threat actor accessed certain Mimecast-issued certificates and related customer server connection information. The threat actor also accessed a subset of email addresses and other contact information, as well as encrypted and/or hashed and salted credentials. In addition, the threat actor accessed and downloaded a limited number of our source code repositories, but we found no evidence of any modifications to our source code nor do we believe there was any impact on our products. As the investigation progressed, we issued a series of advisories to affected customers, including recommended precautionary steps to mitigate risk and, in some cases, to address regulatory requirements. Our forensic investigation was completed in March 2021 and we have eliminated the threat actor’s access to our environment. We have taken a number of actions to prevent future access to our environment and we will continue to monitor for threats and take precautionary steps as needed.

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We are subject to risk and significant uncertainties as a result of this security incident, including those described in Part II, Item 1A, “Risk Factors – Data security and integrity are critically important to our business, and breaches of our information and technology networks and unauthorized access to a customer’s data, including our recent security incident, could harm our business and operating results” below. While our investigation is complete, there can be no assurance as to what the overall impact of these events will be.  These types of events often have cascading impacts that unfold over time and may result in a loss of revenue, a diminution of our business prospects and incremental costs, including costs associated with litigation or investigations by regulatory authorities, any of which may adversely impact our financial results.

We have incurred and expect to incur significant costs related to the security incident. For the year ended March 31, 2021, we recorded $0.8 million of pre-tax expenses related to the security incident, net of anticipated insurance recoveries. For the three months ended June 30, 2021, expenses related to the security incident were not material. Expenses include costs of the forensic investigation, remediation costs, and legal and other professional services. It is also expected that we will continue to incur costs related to our response, remediation, and investigatory efforts relating to this security incident. While we have cyber insurance coverage, the amount of such insurance may be insufficient to compensate us for any expenses or losses that may result from the security incident or the insurance carrier may refuse to reimburse us for certain costs under the terms of the policy. The full scope of the costs and related impacts of the security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

Key Factors Affecting Our Performance

We believe that the growth of our business and our future success are dependent upon a number of key factors, including the following:

Acquisition of new customers. We employ a sales strategy that focuses on acquiring new customers, through our direct sales force and network of channel partners, and selling additional products to existing customers. Acquiring new customers, particularly large, enterprise customers, is a key element of our continued success, growth opportunity and future revenue. We have invested in and intend to continue to invest in our direct sales force and channel partners. During the twelve months ended June 30, 2021, our customer base increased by approximately 1,900 organizations.

Selling of additional services to existing customers. Our direct sales force, together with our channel partners and dedicated customer experience team, seek to generate additional revenue from our existing customers by adding more of their employees to our services and selling additional services. We continue to believe a significant opportunity exists for us to sell additional services to current customers as they experience the benefits of our services and we address additional business use cases.

Investment in growth. We have invested in and intend to continue to invest in the expansion of our operations, headcount and software development to both enhance our current offerings and build new features and products. We expect our total operating expenses to increase, particularly as we continue to expand our sales operations, marketing activities and research and development team. We intend to continue to invest in our sales, marketing and customer experience organizations to drive additional revenue and support the growth of our customer base. Investments we make in our sales and marketing and research and development organizations will occur in advance of experiencing the full benefit from such investments. For the year ending March 31, 2022, we plan to continue increasing the size of our sales force, investing in the development of additional marketing content and increasing the size of our research and development team.

Currency fluctuations. We conduct business in the United States and in other countries in North America, the United Kingdom and in other countries in Europe, South Africa and in other countries in Africa, Australia and the UAE. As a result, we are exposed to risks associated with fluctuations in currency exchange rates, particularly between the U.S. dollar, the British pound and the South African rand. In the three months ended June 30, 2021, 53% of our revenue was denominated in U.S. dollars, 26% in British pounds, 11% in South African rand and 11% in other currencies. Given that the functional currency of our subsidiaries is generally the local currency of each entity, but our reporting currency is the U.S. dollar, devaluations of the British pound, South African rand and other currencies relative to the U.S. dollar impacts our profitability.

We believe that the global COVID-19 pandemic could impact some or all of these key factors. See Part II, Item 1A, “Risk Factors - The global COVID-19 pandemic, including the related containment efforts, has had, and will likely continue to have, certain negative impacts on our business and operations, and we are unable to predict with certainty the extent to which it may continue to adversely affect our business, results of operations and financial condition.”

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Key Performance Indicators

In addition to traditional financial metrics, such as revenue and revenue growth trends, we monitor several other key performance indicators to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies. The key performance indicators that we monitor are as follows:

	Three months ended June 30,
	2021			2020
	(dollars in thousands)
Revenue constant currency growth rate (1)		15	%		21	%
Gross profit percentage		76	%		75	%
Free cash flow (1)	$	31,605		$	18,534
Adjusted EBITDA (1)	$	38,593		$	25,665

	As of June 30,
	2021			2020
Net revenue retention rate		105	%		106	%
Total customers (2)		40,600			38,600

(1) Adjusted EBITDA, free cash flow, and revenue constant currency growth rates are non-GAAP financial measures. For a reconciliation of Adjusted EBITDA, free cash flow and revenue constant currency growth rates to the nearest comparable GAAP measures, see “Reconciliations of Non-GAAP Financial Measures” below.

(2) Reflects the customer count on the last day of the period rounded to the nearest hundred customers. We define a customer as an entity with an active subscription contract as of the measurement date. A customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. In determining the number of customers, we do not include customers we acquired as a result of our acquisition of DMARC Analyzer B.V., or DMARC Analyzer, which transact with us on a credit card basis.

Revenue constant currency growth rate. We believe revenue constant currency growth rate is a key indicator of our performance as it measures how we are executing on our strategy exclusive of currency fluctuations, which are beyond our control. We calculate revenue constant currency growth rate by translating revenue from entities reporting in foreign currencies into U.S. dollars using the comparable foreign currency exchange rates from the prior fiscal period. For further explanation of the uses and limitations of this non-GAAP measure and a reconciliation of our revenue constant currency growth rate to revenue, as reported, the most directly comparable GAAP measure, “Reconciliations of Non-GAAP Financial Measures” below. We expect our constant currency growth rate will decline in the fiscal year ended March 31, 2022 as compared to the prior fiscal year.

Gross profit percentage. We believe gross profit percentage is a key indicator of our efficiency in offering our services to our customers. Gross profit percentage is calculated as gross profit divided by revenue. Our gross profit percentage has seen growth over the past three years and we expect it to remain relatively consistent for the year ending March 31, 2022; however, it has fluctuated and will continue to fluctuate on a quarterly basis due to timing of the addition of hardware and employees to serve our growing customer base. Gross profit also includes amortization of intangible assets related to acquired businesses. We provide our services in each of the regions in which we operate. Costs related to supporting and hosting our product offerings and delivering our services are incurred in the region in which the related revenue is recognized. As a result, our gross profit percentage in actual terms is consistent with gross profit on a constant currency basis.

Free cash flow. We believe free cash flow is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property, equipment and capitalized software, can be used for strategic opportunities, including investing in our business, and strengthening the balance sheet. Analysis of free cash flow facilitates management’s comparisons of our operating results to competitors’ operating results. We define free cash flow as net cash provided by operating activities minus purchases of property, equipment and capitalized software. For further explanation of the uses and limitations of this non-GAAP measure and a reconciliation of our free cash flow to the most directly comparable GAAP measure, net cash provided by operating activities, see “Reconciliations of Non-GAAP Financial Measures” below.

Adjusted EBITDA. We believe that Adjusted EBITDA is a key indicator of our operating results. We define Adjusted EBITDA as net income (loss), adjusted to exclude: depreciation, amortization, disposals and impairment of long-lived assets, acquisition-related gains and expenses, litigation-related expenses, share-based compensation expense, restructuring expense, interest income and interest expense, the benefit from (provision for) income taxes and foreign exchange income (expense). For further explanation of the uses and limitations of this non-GAAP measure and a reconciliation of our Adjusted EBITDA to the most directly comparable GAAP measure, net income, see “Reconciliations of Non-GAAP Financial Measures” below. We expect that our Adjusted EBITDA will continue to

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increase compared to the prior fiscal year; however, we expect that our operating expenses will also increase in absolute dollars as we focus on expanding our sales and marketing teams and growing our research and development capabilities.

Net revenue retention rate. We believe that our ability to retain customers is an indicator of the stability of our revenue base and the long-term value of our customer relationships. Our net revenue retention rate is driven by our customer renewals and upsells. We calculate our net revenue retention rate by annualizing constant currency revenue recorded on the last day of the measurement period for only those customers in place throughout the entire measurement period. This revenue includes renewed revenue contracts as well as additional revenue derived from the sale of additional seat licenses as well as additional services sold to these existing customers. We divide the result by revenue on a constant currency basis on the first day of the measurement period for all customers in place at the beginning of the measurement period. The measurement period is the trailing twelve months. The revenue on a constant currency basis is based on the average exchange rates in effect during the respective period.

Total customers. We believe the total number of customers is a key indicator of our financial success and future revenue potential. We define a customer as an entity with an active subscription contract as of the measurement date. A customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. In determining the number of customers, we do not include customers we acquired from DMARC Analyzer that transact with us on a credit card basis. We expect to continue to grow our customer base through the addition of new customers in each of our markets.

Reconciliations of Non-GAAP Financial Measures

Revenue constant currency growth rate

In order to determine how our business performed exclusive of the effect of foreign currency fluctuations, we compare the percentage change in our revenue from one period to another using a constant currency. To determine the revenue constant currency growth rate for each period, revenue from entities reporting in foreign currencies was translated into U.S. dollars using the comparable prior period’s foreign currency exchange rates. For example, the average rates in effect for the three months ended June 30, 2020 were used to convert revenue for the three months ended June 30, 2021 and the revenue for the comparable prior period ended June 30, 2020, rather than the actual exchange rates in effect during the respective periods. Revenue constant currency growth rate is a non-GAAP financial measure. A reconciliation of this non-GAAP measure to its most directly comparable GAAP measure for the respective periods can be found in the table below.

	Three months ended June 30,
	2021			2020
	(dollars in thousands)
Reconciliation of Revenue Constant Currency Growth Rate:
Revenue, as reported	$	142,549		$	115,176
Revenue year-over-year growth rate, as reported		24	%		16	%
Estimated impact of foreign currency fluctuations		(9	)%		5	%
Revenue constant currency growth rate		15	%		21	%

The impact of foreign exchange rates is highly variable and difficult to predict. We use revenue constant currency growth rate to show the impact from foreign exchange rates on the current period revenue growth rate compared to the prior period revenue growth rate using the prior period’s foreign exchange rates. In order to properly understand the underlying business trends and performance of our ongoing operations, we believe that investors may find it useful to consider the impact of excluding changes in foreign exchange rates from our revenue growth rate.

We believe that presenting this non-GAAP financial measure in this Quarterly Report on Form 10-Q provides investors greater transparency to the information used by our management for financial and operational decision-making and allows investors to see our results “through the eyes” of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by management to evaluate and measure such performance.

However, this non-GAAP measure should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. For example, revenue constant currency growth rates, by their nature, exclude the impact of foreign exchange, which may have a material impact on GAAP revenue. Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

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Free cash flow

Free cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities minus purchases of property, equipment and capitalized software. We believe free cash flow provides investors and other users of our financial information useful information about the amount of cash generated by the business that, after the acquisition of property, equipment and capitalized software, can be used for strategic opportunities, including investing in our business, and strengthening the balance sheet. Analysis of free cash flow facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating our company is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Management compensates for this limitation by providing information about our capital expenditures on the face of the cash flow statement and in the “Liquidity and Capital Resources” section below.

We do not place undue reliance on free cash flow as a measure of operating performance. This non-GAAP measure should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using a non-GAAP financial measure, including that other companies may calculate this measure differently than we do, limiting the usefulness of those measures for comparative purposes.

The following table presents a reconciliation of net cash provided by operating activities to free cash flow:

	Three months ended June 30,
	2021			2020
Reconciliation of Free Cash Flow:
Net cash provided by operating activities	$	40,700		$	29,305
Purchases of property, equipment and capitalized software		(9,095	)		(10,771	)
Free cash flow	$	31,605		$	18,534

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net income, adjusted to exclude: depreciation, amortization, disposals and impairment of long-lived assets, acquisition-related gains and expenses, litigation-related expenses, share-based compensation expense, restructuring expense, interest income and interest expense, the benefit from (provision for) income taxes and foreign exchange income (expense).

We believe that Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with our peer companies, many of which use a similar non-GAAP financial measure to supplement their GAAP results.

We use Adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance.

We do not place undue reliance on Adjusted EBITDA as a measure of operating performance. This non-GAAP measure should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using a non-GAAP financial measure, including that other companies may calculate this measure differently than we do, that it does not reflect our capital expenditures or future requirements for capital expenditures and that it does not reflect changes in, or cash requirements for, our working capital.

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The following table presents a reconciliation of net income to Adjusted EBITDA:

	Three months ended June 30,
	2021		2020
	(in thousands)
Reconciliation of Adjusted EBITDA:
Net income	$	10,072	$	3,138
Depreciation, amortization and disposals of long-lived assets		9,876		8,852
Interest expense, net		378		706
Provision for income taxes		365		613
Share-based compensation expense		17,388		13,653
Foreign exchange expense (income)		514		(1,662	)
Acquisition-related expenses (1)		—		365
Adjusted EBITDA	$	38,593	$	25,665

(1) Acquisition-related expenses relate primarily to legal and other professional fees incurred for acquisition activity in each respective period. See Note 10 to the unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q for further information.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to use estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the estimates and assumptions involved in revenue recognition, deferred revenue, goodwill and long-lived asset impairment assessments, accounting for income taxes and share-based compensation have the greatest potential impact on our condensed consolidated financial statements and consider these to be our critical accounting policies. Historically, our estimates and assumptions relative to our critical accounting policies have not differed materially from actual results. For further information on our critical and other significant accounting policies, see the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on May 27, 2021. There have been no changes to our significant accounting policies since March 31, 2021.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended June 30, 2021 that are of significance or potential significance to us as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K filed with the SEC on May 27, 2021.

Components of Consolidated Statements of Operations

Revenue

We generate substantially all of our revenue from subscription fees paid by customers accessing our cloud services and by customers purchasing additional support beyond the standard support that is included in our basic subscription fees. A small portion of our revenue consists of related professional services and other revenue, which consists primarily of performance obligations related to set-up, ingestion, and training fees.

We generally license our services on a price per employee basis under annual contracts. In some instances, we receive upfront payments, which are determined to be material rights to a discount upon renewal. In these instances, we recognize revenue related to the upfront payment over the estimated customer benefit period, which has been determined to be six years.

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Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

We recognize revenue ratably on a straight-line basis over the subscription term, which begins when we have given the customer access to our SaaS solutions. Our subscription contracts are typically one year in duration and do not contain refund-type provisions.

Our professional services contracts are recognized based on out-put measures of performance.

We serve approximately 40,600 customers in multiple industries, and our revenue is not concentrated with any single customer or industry. For the three months ended June 30, 2021 and 2020, no single customer accounted for more than 1% of our revenue, and our largest ten customers accounted for less than 10% of our revenue in aggregate.

Cost of revenue

Cost of revenue primarily consists of expenses related to supporting and hosting our product offerings and delivering our professional services. These costs consist primarily of personnel and related costs including salaries, benefits, bonuses and share-based compensation expense related to the management of our data centers, our customer support team and our professional services team. In addition to these expenses, we incur third-party service provider costs such as data center and networking expenses, allocated overhead costs, depreciation expense and amortization expense related to capitalized software and acquired intangible assets. We allocate overhead costs, such as rent and facility costs, information technology costs and employee benefit costs to all departments based on headcount. As such, general overhead expenses are reflected in cost of revenue and each operating expense category.

We expect our cost of revenue to increase in absolute dollars due to expenditures related to the purchase of hardware, expansion and support of our data center operations and customer support teams. We also expect that cost of revenue as a percentage of revenue will remain relatively consistent for the year ending March 31, 2022 and will decrease over time as we are able to achieve economies of scale in our business, although it may fluctuate from period to period depending on the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services. The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue in any particular quarterly or annual period.

Research and development expenses

Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, share-based compensation expense, costs of server usage by our developers and allocated overhead costs. We expense all research and development costs as they are incurred. We have focused our efforts on developing new versions of our SaaS technology with expanded features. Our technology is constantly being refined and, as such, we do not capitalize development costs. We believe that continued investment in our technology is important for our future growth. As a result, we expect research and development expenses to increase in absolute dollars as we make further investments in developing our Mime | OS™ platform, improving our existing services and creating new features and products. Research and development expenses as a percentage of total revenue may fluctuate on a quarterly basis but we expect it to remain relatively consistent in the coming fiscal year as a result of the expected investments noted above. The full scope of the costs and related impacts of our recent security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

Sales and marketing expenses

Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions and share-based compensation expense. In addition to these expenses, we incur costs related to marketing and promotional events, online marketing, product marketing and allocated overhead costs. We expense all costs as they are incurred, excluding sales commissions identified as incremental costs to obtain a contract, which are capitalized and amortized over the life of our customers, which we estimate to be six years. Sales and marketing expenses increased in the three months ended June 30, 2021 compared to the three months ended June 30, 2020 as we continued to expand our sales and marketing efforts globally, particularly in the United States. We expect that our sales and marketing expenses will continue to increase in absolute dollars in the year ending March 31, 2022 but remain relatively consistent as a percentage of revenue as compared to fiscal 2021. New sales personnel require training and may take several months or more to achieve productivity; as such, the costs we incur in connection with the hiring of new sales personnel in a given period are not typically offset by increased revenue in that period and may not result in new revenue if these sales personnel fail to become productive. We expect to increase our investment in sales and marketing as we add new services, and as we continue to focus on sales to large, enterprise prospects, which will increase these expenses in absolute dollars. Over the longer term, we believe that sales and marketing expenses as a percentage of revenue will vary depending upon the mix of revenue from new and existing customers, as well as changes in the productivity of our sales and marketing programs. The full scope of the costs and related impacts of our recent security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

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General and administrative expenses

General and administrative expenses consist primarily of personnel and related expenses for executive, legal, finance, information technology and human resources functions, including salaries, benefits, incentive compensation and share-based compensation expense, in addition to the costs associated with professional fees, litigation-related expenses, insurance premiums, other corporate expenses and allocated overhead costs. We expect general and administrative expenses to increase in absolute dollars as we continue to incur additional personnel and professional services costs in order to support business growth, costs associated with acquisitions, legal fees and litigation-related expenses, funding transactions, and others. Over the longer term, we believe that general and administrative expenses as a percentage of revenue will decrease. The full scope of the costs and related impacts of our recent security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

Other income (expense)

Other income (expense) is comprised of the following items:

Interest income

Interest income includes interest income earned on our cash, cash equivalents and investments balances. We expect interest income to vary each reporting period depending on our average cash, cash equivalents and investments balances during the period and market interest rates.

Interest expense

Interest expense consists primarily of interest expense associated with our long-term debt and our finance leases. We expect interest expense in fiscal 2022 associated with our long-term debt to decrease compared to fiscal 2021 primarily due to lower principal balances associated with our long-term debt and the current interest rate environment.

Foreign exchange (expense) income and other, net

Foreign exchange (expense) income and other, net consists primarily of foreign exchange fluctuations related to short-term intercompany accounts, foreign currency exchange gains and losses related to transactions denominated in currencies other than the functional currency for each of our subsidiaries and other non-operating items including sublease income and other income. We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change.

Provision for income taxes

We operate in several tax jurisdictions and are subject to tax in each country or jurisdiction in which we conduct business. We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases for assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Our provision for income taxes for the three months ended June 30, 2021 was primarily attributable to the tax provision recorded on the earnings of our profitable entities, partially offset by the discrete tax benefit of $1.3 million related to excess tax benefits on share-based compensation realized by U.S. and U.K. employees.

Our provision for income taxes for the three months ended June 30, 2020 was primarily attributable to the tax provision recorded on the earnings of our profitable entities, partially offset by the discrete tax benefit of $0.4 million related to excess tax benefits on non-qualified share option exercises by U.S. employees.

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Comparison of Period-to-Period Results of Operations

The following table sets forth our condensed consolidated statements of operations data for each of the periods indicated:

	Three months ended June 30,
	2021			2020
	(in thousands)
Revenue	$	142,549		$	115,176
Cost of revenue		33,549			28,469
Gross profit		109,000			86,707
Operating expenses
Research and development		31,486			22,802
Sales and marketing		48,262			44,043
General and administrative		17,923			17,168
Total operating expenses		97,671			84,013
Income from operations		11,329			2,694
Other income (expense)
Interest income		158			177
Interest expense		(536	)		(883	)
Foreign exchange (expense)  income and other, net		(514	)		1,763
Total other income (expense), net		(892	)		1,057
Income before income taxes		10,437			3,751
Provision for income taxes		365			613
Net income	$	10,072		$	3,138

The following table sets forth our condensed consolidated statements of operations data as a percentage of revenue for each of the periods indicated:

	Three months ended June 30,
	2021			2020
Revenue		100	%		100	%
Cost of revenue		24	%		25	%
Gross profit		76	%		75	%
Operating expenses
Research and development		22	%		20	%
Sales and marketing		34	%		38	%
General and administrative		13	%		15	%
Total operating expenses		69	%		73	%
Income from operations		8	%		2	%
Other income (expense)
Interest income		—	%		—	%
Interest expense		—	%		(1	)%
Foreign exchange (expense) income and other, net		—	%		2	%
Total other income (expense), net		(1	)%		1	%
Income before income taxes		7	%		3	%
Provision for income taxes		—	%		1	%
Net income		7	%		3	%

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We have operations in jurisdictions other than the United States and generate revenue and incur expenditures in currencies other than the U.S. dollar. The following information shows the effect on certain components of our condensed consolidated statements of operations data for each of the periods indicated below based on a 10% increase or decrease in foreign currency exchange rates assuming that all foreign currency exchange rates move in the same direction at the same time:

	Three months ended June 30,
	2021		2020
	(in millions)
Revenue	$	7.2	$	5.1
Cost of revenue		2.0		1.6
Research and development		2.2		1.6
Sales and marketing		2.1		1.8
General and administrative		0.6		0.5

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

Revenue

	Three months ended June 30,				Period-to-period change
	2021		2020		Amount		% Change
	(dollars in thousands)
Revenue	$	142,549	$	115,176	$	27,373		24	%

Revenue increased $27.4 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The increase in revenue was primarily attributable to increases in new customers, including approximately 1,900 new customers added since June 30, 2020, a full quarter of revenue related to new customers added during the first quarter of fiscal 2021 and additional revenue from customers that existed as of June 30, 2020. Revenue for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was positively impacted by approximately $9.7 million as a result of the weakening of the U.S. dollar relative to the British pound, South African rand, and Australian dollar.

Cost of revenue

	Three months ended June 30,				Period-to-period change
	2021		2020		Amount		% Change
	(dollars in thousands)
Cost of revenue	$	33,549	$	28,469	$	5,080		18	%

Cost of revenue increased $5.1 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, which was primarily attributable to increases in data center costs of $2.2 million, personnel-related costs of $1.1 million, and depreciation expense of $0.6 million. Cost of revenue expenses for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, were negatively impacted by approximately $2.5 million primarily as a result of the weakening of the U.S. dollar relative to the British pound and South African rand. Data center costs increased primarily as a result of the increase in our customer base and expanding infrastructure, personnel-related costs increased primarily as a result of salaries and benefits associated with annual merit increases and increased headcount, and depreciation expense increased primarily as a result of increased capital expenditures in support of our expanding infrastructure.

As a result of changes in foreign currency exchange rates, gross profit increased in absolute dollars by approximately $7.2 million for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. Excluding the impact of changes in foreign currency exchange rates, gross profit as a percentage of revenue remained consistent as costs related to supporting and hosting our product offerings and delivering our services are primarily incurred in the region in which the related revenue is recognized.

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Operating expenses

	Three months ended June 30,				Period-to-period change
	2021		2020		Amount		% Change
	(dollars in thousands)
Operating expenses:
Research and development	$	31,486	$	22,802	$	8,684		38	%
Sales and marketing		48,262		44,043		4,219		10	%
General and administrative		17,923		17,168		755		4	%
Total operating expenses	$	97,671	$	84,013	$	13,658		16	%

Research and development expenses

Research and development expenses increased $8.7 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, which was primarily attributable to increases in personnel-related costs of $2.9 million, professional services costs of $2.6 million, and share-based compensation expense of $2.6 million. Research and development expenses for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, were negatively impacted by approximately $2.3 million primarily as a result of the weakening of the U.S. dollar relative to the British pound. Personnel-related costs increased primarily as a result of salaries and benefits associated with annual merit increases and increased headcount. Professional services costs increased primarily due to increased consulting fees. Share-based compensation expense increased primarily as a result of the acceleration of expense for certain awards due to changes in requisite service periods and to a lesser extent equity grants issued to employees since the prior year.

Sales and marketing expenses

Sales and marketing expenses increased $4.2 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, which was primarily attributable to increases in personnel-related costs of $4.0 million. Sales and marketing expenses for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, were negatively impacted by approximately $2.6 million primarily as a result of the weakening of the U.S. dollar relative to the British pound, Australian dollar, and South African rand. Personnel-related costs increased primarily as a result of salaries and benefits associated with increased commissions and annual merit increases.

Other income (expense)

	Three months ended June 30,						Period-to-period change
	2021			2020			Amount			% Change
	(dollars in thousands)
Other income (expense):
Interest income	$	158		$	177		$	(19	)		(11	)%
Interest expense		(536	)		(883	)		347			(39	)%
Foreign exchange (expense) income and other, net		(514	)		1,763			(2,277	)	nm
Total other income (expense), net	$	(892	)	$	1,057		$	(1,949	)	nm

nm – not meaningful

Foreign exchange (expense) income and other, net changed by $2.3 million primarily as a result of a decrease in foreign exchange income of $2.2 million on intercompany balances.

Provision for income taxes

	Three months ended June 30,				Period-to-period change
	2021		2020		Amount			% Change
	(dollars in thousands)
Provision for income taxes	$	365	$	613	$	(248	)		(40	)%

The provision for income taxes decreased by $0.2 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The decrease in the provision for income taxes was primarily attributable to an increase in the discrete tax benefits related to excess tax benefits on share-based compensation realized by U.S. and U.K. employees, offset partially by the tax on increased earnings.

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Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents, investments, accounts receivable and our Revolving Facility (as defined below). The following table shows net cash provided by operating activities, net cash used in investing activities, and net cash provided by financing activities for the three months ended June 30, 2021 and 2020:

	Three months ended June 30,
	2021			2020
	(in thousands)
Net cash provided by operating activities	$	40,700		$	29,305
Net cash used in investing activities		(9,095	)		(10,771	)
Net cash provided by financing activities		12,606			3,963

As of June 30, 2021 and March 31, 2021, we had cash and cash equivalents of $338.4 million and $292.9 million, respectively. Net cash provided by operating activities was $40.7 million for the three months ended June 30, 2021. In the year ending March 31, 2022, we expect net cash provided by operating activities to increase as compared to the year ended March 31, 2021. In the year ending March 31, 2022, we plan to continue to invest in the development and expansion of our Mime | OS™ platform to improve on our existing solutions and develop new services in order to provide more capabilities to our customers. Investments in capital expenditures in the year ended March 31, 2021 were $38.6 million, of which $36.6 million related to the expansion of our grid architecture. We expect fiscal year 2022 capital expenditures to remain relatively consistent with fiscal year 2021.

Based on our current operating plan, we believe that our current cash and cash equivalents, Revolving Facility (as defined below) and operating cash flows will be sufficient to fund our operations for at least the next twelve months from the date of filing this Quarterly Report on Form 10-Q. Our future capital requirements may vary materially from those planned and will depend on certain factors, such as, our growth and our operating results. If we require additional capital resources to grow our business or to acquire complementary technologies and businesses in the future, we may seek to sell additional equity or raise funds through debt financing or other sources. We cannot provide assurance that additional financing will be available at all or on terms favorable to us. We had commitments for capital expenditures of approximately $11.5 million as of June 30, 2021, primarily related to the expansion of our grid architecture.

Borrowings and Credit Facility

In July 2018, we entered into a Credit Agreement, or the Credit Agreement, by and among us, certain of our subsidiaries party thereto, as guarantors, certain financial institutions party thereto from time to time, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, or the Administrative Agent. The Credit Agreement provided the Company with a $100.0 million senior secured term loan, or the Term Loan, and a $50.0 million senior secured revolving credit facility, or the Revolving Facility, and together with the Term Loan, the Credit Facility, which is available to fund working capital and for other corporate purposes, including to finance permitted acquisitions and investments. In June 2020, the Credit Agreement was amended to permit us to issue letters of credit in certain additional foreign currencies beyond the U.S. dollar and the British pound (as amended, the Credit Agreement, the Term Loan and the Revolving Facility are referred to herein as the Credit Facility). Total availability under the Revolving Facility is reduced by outstanding letters of credit of $2.2 million. As of June 30, 2021 and March 31, 2021, total availability under the Revolving Facility was $30.3 million. In July 2020, we drew down $17.5 million under the Revolving Facility. See Note 12 to the unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q for further information. Interest under the Credit Facility accrues at a rate between LIBOR plus 1.375% and LIBOR plus 1.875%, based on our ratio of indebtedness to earnings before interest, taxes, depreciation, amortization and certain other adjustments, or Consolidated EBITDA. Based on this ratio, the current interest rate as of June 30, 2021 under the Credit Facility is LIBOR plus 1.375%. The InterContinental Exchange Benchmark Administration has announced that it will no longer publish certain tenors of the LIBOR rate starting in 2021. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk” below for further information. The term of the Credit Facility is five years, maturing on July 23, 2023. At the time we entered into the Credit Agreement, we had no existing debt.

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The Credit Facility has financial covenants that require us to maintain a Consolidated Secured Leverage Ratio (as described below), which commenced on September 30, 2018, of not more than 3.00 to 1.00 for the four consecutive fiscal quarter period ending on the last day of each fiscal quarter, or the Reference Period, with a step-up to 3.50 to 1.00 for any four-quarter period in which we consummate a permitted acquisition having an aggregate purchase price in excess of $25.0 million. We must also maintain a Consolidated Interest Expense Ratio of 3.00 to 1.00 which commenced on September 30, 2018 and for each Reference Period thereafter. For purposes of the covenants, “Consolidated Secured Leverage Ratio” generally refers to the ratio of Consolidated Funded Debt that is secured by a lien on assets of us or our subsidiaries to Consolidated EBITDA. “Consolidated Funded Debt” generally refers to borrowed money, debt instruments, finance leases, deferred purchase price of property or services (excluding accounts payable in the ordinary course of business) and earn outs that are due and payable. “Consolidated Interest Expense Ratio” generally refers to the ratio of Consolidated EBITDA to cash interest expense with respect to indebtedness, with certain exclusions. The Company was in compliance with all covenants as of June 30, 2021 and management reasonably believes it will be in compliance with such covenants over the next 12 months.

All obligations under the Credit Agreement are unconditionally guaranteed by all of our material direct and indirect subsidiaries organized under the laws of the United States, the United Kingdom, the Bailiwick of Jersey, and other jurisdictions agreed to by us and the Administrative Agent, with certain exceptions. These guarantees are secured by substantially all of the present and future property and assets of the guarantors, with certain exclusions.

The foregoing summary (and any reference to the Credit Facility contained in this Quarterly Report on Form 10-Q) does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement and the related agreements, which are filed as Exhibits 10.12, 10.13, 10.14, 10.15, 10.16, 10.17, 10.18, 10.19, 10.20 and 10.34 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Operating activities

For the three months ended June 30, 2021, cash provided by operating activities was $40.7 million. The primary factors affecting our operating cash flows during the period were our net income of $10.1 million, adjusted for non-cash items of $17.4 million of share-based compensation expense, $9.9 million for depreciation and amortization of our property, equipment and intangible assets, $8.3 million of amortization of operating lease right-of-use assets, and $4.2 million in amortization of deferred contract costs. The drivers of the changes in operating assets and liabilities were a $8.0 million decrease in operating lease liabilities, a $6.9 million decrease in accrued expenses and other liabilities, a $6.6 million decrease in deferred revenue, a $5.4 million increase in deferred contract costs, and a $1.2 million increase in prepaids and other current assets, partially offset by a $13.9 million increase in accounts receivable and a $4.4 million increase in accounts payable.

For the three months ended June 30, 2020, cash provided by operating activities was $29.3 million. The primary factors affecting our operating cash flows during the period were our net income of $3.1 million, adjusted for non-cash items of $13.7 million of share-based compensation expense, $7.1 million for amortization of our operating lease right-of-use assets, $8.9 million for depreciation and amortization of our property, equipment and intangible assets, and $2.9 million for amortization of deferred contract costs, partially offset by unrealized currency gains on foreign denominated transactions of $2.7 million. The primary drivers of the changes in operating assets and liabilities were an $8.2 million decrease in operating lease liabilities, a $5.6 million decrease in deferred revenue, a $5.2 million increase in deferred contract costs, and a $2.0 million decrease in accounts payable, partially offset by a $12.4 million decrease in accounts receivable and a $5.3 million increase in accrued expenses and other liabilities primarily due to participation in one-time government programs that allow for payment deferrals due to the global COVID-19 pandemic.

Investing activities

For the three months ended June 30, 2021, cash used in investing activities consisted of $9.1 million in purchases of property, equipment and capitalized software, primarily associated with computer equipment purchased in support of our expanding infrastructure.

For the three months ended June 30, 2020, cash used in investing activities consisted of $10.8 million in purchases of property, equipment and capitalized software, primarily associated with computer equipment purchased in support of our expanding infrastructure.

Financing activities

Cash provided by financing activities of $12.6 million for the three months ended June 30, 2021 was primarily due to proceeds from issuance of ordinary shares under our equity plans of $22.0 million, partially offset by withholding taxes related to net share settlement of employee stock purchase plan, or ESPP, purchases and vesting of restricted share units, or RSUs, of $7.2 million and payments on debt of $1.9 million.

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Cash provided by financing activities of $4.0 million for the three months ended June 30, 2020 was due to proceeds from issuance of ordinary shares under our equity plans of $8.1 million, partially offset by withholding taxes related to net share settlement of ESPP purchases and vesting of RSUs of $2.6 million and payments on debt of $1.3 million.

Net operating loss carryforwards and income tax credits

As of June 30, 2021, we had net operating loss carryforwards in the U.K., U.S. federal and state, Australia, Germany, Israel, and Canada.  U.S. federal net operating losses generated through the fiscal year ending March 31, 2018 expire at various dates through 2038 while U.S. federal net operating losses generated after March 31, 2018 do not expire. Substantially all U.S. state net operating loss carryforwards expire at various dates through 2041. Net operating losses in Canada expire in 2041. Net operating loss carryforwards in the U.K., Australia, Germany and Israel do not expire. As of June 30, 2021, we had U.K. income tax credit carryforwards that do not expire. As of June 30, 2021, we had Israel income tax credit carryforwards that expire at various dates from 2024 through 2026.

In assessing our ability to realize our net deferred tax assets, we considered various factors including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations, to determine whether it is more likely than not that some portion or all of our net deferred tax assets will not be realized. Based upon these factors, we have determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against our net deferred tax assets.

Contractual obligations and commitments

Our principal commitments consist of obligations under debt facilities, leases for office space, leases for data center facilities, non-lease data center obligations, intangible asset obligations, and capital expenditures. For more information regarding our debt obligations, see Note 12 to the condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q. For more information regarding our lease obligations, see Note 6 to the condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-K. For more information regarding our other contractual commitments associated with agreements that are enforceable and legally binding and that specify all significant terms refer to our Annual Report on Form 10-K filed with the SEC on May 27, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency rates, although we also have some exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Foreign Currency Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound and South African rand. Percentage of revenues and expenses in foreign currency were as follows:

	Three months ended June 30,
	2021			2020
Revenue generated in locations outside the United States		50	%		47	%
Revenue in currencies other than the United States dollar		48	%		44	%
Expenses in currencies other than the United States dollar		49	%		49	%

Percentage of revenues and expenses denominated in foreign currency were as follows:

	Three months ended June 30, 2021
	Revenues			Expenses
British pound		26	%		31	%
South African Rand		11	%		5	%
Other currencies		11	%		13	%
Total		48	%		49	%

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	Three months ended June 30, 2020
	Revenues			Expenses
British pound		26	%		32	%
South African Rand		10	%		4	%
Other currencies		8	%		13	%
Total		44	%		49	%

As of June 30, 2021 and March 31, 2021, we had $48.5 million and $58.8 million, respectively, of receivables denominated in currencies other than the U.S. dollar. We also maintain cash accounts denominated in currencies other than the local currency, which exposes us to foreign exchange rate movements. As of June 30, 2021 and March 31, 2021, we had $101.0 million and $81.5 million, respectively, of cash denominated in currencies other than the U.S. dollar. As of June 30, 2021, cash denominated in British pounds and South African rand was $47.1 million and $30.3 million, respectively. As of March 31, 2021, cash denominated in British pounds and South African rand was $36.6 million and $27.8 million, respectively.

In addition, although our foreign subsidiaries have intercompany accounts that are eliminated upon consolidation, these accounts expose us to foreign currency exchange rate fluctuations. Exchange rate fluctuations on short-term intercompany accounts are recorded in our condensed consolidated statements of operations under “foreign exchange (expense) income and other, net.”

Currently, our largest foreign currency exposures are to the British pound and South African rand. From time to time certain macroeconomic events have resulted in volatility in exchange rates including the global COVID-19 pandemic and the United Kingdom’s exit from the European Union. See Part II, Item 1A, “Risk Factors – Fluctuations in currency exchange rates could adversely affect our business.” Relative to foreign currency exposures existing as of June 30, 2021, significant movements in foreign currency exchange rates may expose us to significant losses in earnings or cash flows or significantly diminish the fair value of our foreign currency financial instruments. For the three months ended June 30, 2021, we estimate that a 10% unfavorable movement in foreign currency exchange rates against the U.S. dollar would have decreased revenue by $7.2 million, decreased expenses by $6.9 million and had a negative impact on our operating results of $0.3 million. For the three months ended June 30, 2020, we estimate that a 10% unfavorable movement in foreign currency exchange rates against the U.S. dollar would have decreased revenue by $5.1 million, decreased expenses by $5.5 million and would have had a positive impact on our operating results of $0.4 million. The estimates used assume that all currencies move in the same direction at the same time and the ratio of non-U.S. dollar denominated revenue and expenses to U.S. dollar denominated revenue and expenses does not change from current levels. Since a portion of our revenue is deferred revenue that is recorded at different foreign currency exchange rates, the impact to revenue of a change in foreign currency exchange rates is recognized over time, and the impact to expenses is more immediate, as expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred. All of the potential changes noted above are based on sensitivity analyses performed on our financial results for the three months ended June 30, 2021 and 2020.

Inflation Risk

Inflationary factors, such as increases in our operating expenses, may adversely affect our results of operations, as our customers typically purchase services from us on a subscription basis over a period of time. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, an increase in the rate of inflation in the future may have an adverse effect on our levels of operating expenses as a percentage of revenue if we are unable to increase the prices for our subscription-based services to keep pace with these increased expenses.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates. Our investments primarily consist of money market funds. As of June 30, 2021 and March 31, 2021, we had cash and cash equivalents of $338.4 million and $292.9 million, respectively. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these investments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we believe only dramatic fluctuations in interest rates would have a material effect on our investments. We do not believe that an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio. As such we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

34

We entered into the Credit Agreement in July 2018. The Credit Agreement provides us with a $100.0 million senior secured term loan, and a $50.0 million senior secured revolving credit facility. Interest under the Credit Facility accrues at a rate between LIBOR plus 1.375% and LIBOR plus 1.875%. We estimate that a 100 basis point increase in the LIBOR rate would result in approximately $1.0 million of additional interest expense over the ensuing twelve-month period under the Credit Facility. The InterContinental Exchange Benchmark Administration has announced that it will no longer publish the one week and two month tenor LIBOR rates starting in 2021 with remaining tenors to be quoted through June 2023. Our Credit Facility provides that, under certain circumstances set forth in the Credit Facility, we and the Administrative Agent may amend the applicable Credit Facility to replace LIBOR with an alternate benchmark rate, giving due consideration to any evolving or then existing convention for similar syndicated credit facilities in the U.S. market for alternative benchmarks. Such alternative benchmark rate could include the secured overnight financing rate, also known as SOFR, published by the Federal Reserve Bank of New York. We do not expect the change to an alternative rate to have a material impact on our financial results.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that our employees are working remotely due to the global COVID-19 pandemic. We are continually monitoring and assessing the global COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For information on legal proceedings, see Note 13, “Commitments and Contingencies”, to the unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Item 1A. Risk Factors.

The material and other risks and uncertainties summarized above beginning on page i of this Quarterly Report on Form 10-Q and described below are not exhaustive or exclusive. Other sections of this Quarterly Report on Form 10-Q may include additional factors which could adversely affect our business, results of operations and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors not presently known to us or that we currently deem immaterial may emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Business and Operational Risks

Data security and integrity are critically important to our business, and breaches of our information and technology networks and unauthorized access to a customer’s data, including our recent security incident, could harm our business and operating results.

We have experienced, and will continue to experience, cyberattacks and other malicious internet-based activity, which continue to increase in sophistication, frequency and magnitude. Because our services involve the storage of large amounts of our customers’ sensitive and proprietary information, solutions to protect that information from cyberattacks and other threats, data security and integrity are critically important to our business. Also, as more of our customers have moved to working remotely, and continue to work remotely, during the global COVID-19 pandemic, we expect there will be an increased amount of sensitive and proprietary information that is stored in our solutions, which increases the exposure and risk of cyberattacks and other malicious internet-based activity. Despite all of our efforts to protect this information, we cannot provide assurance that our services and databases will not be compromised or disrupted, whether as a result of criminal conduct, DDoS attacks, or other advanced persistent attacks by malicious actors, including hackers, state-backed hackers with significant resources and cybercriminals, breaches due to employee negligence, error and/or malfeasance, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, hardware and software errors, including so-called supply chain attacks involving the vendors we rely upon, telecommunication or utility failures or natural disasters or other catastrophic events. Moreover, the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target. As a result, there can be no guarantees that we will be able to anticipate these techniques or implement adequate preventative measures.

In January 2021, we became aware of a security incident later determined to be conducted by the same sophisticated threat actor responsible for the SolarWinds supply chain attack. We immediately launched an internal forensic investigation. Our investigation was supported by leading third-party forensics and cyber incident response experts at Mandiant, a division of FireEye, Inc., and was conducted in coordination with law enforcement to aid their investigation into this threat actor. During our investigation, we learned that the threat actor used the SolarWinds supply chain compromise to gain access to part of our production grid environment. Using this entry point, the threat actor accessed certain Mimecast-issued certificates and related customer server connection information. The threat actor also accessed a subset of email addresses and other contact information, as well as encrypted and/or hashed and salted credentials. In addition, the threat actor accessed and downloaded a limited number of our source code repositories, but we found no evidence of any modifications to our source code nor do we believe there was any impact on our products. As the investigation progressed, we issued a series of advisories to affected customers, including recommended precautionary steps to mitigate risk and, in some cases, to address regulatory requirements. Our forensic investigation was completed in March 2021 and we have eliminated the threat actor’s access to our environment. We have taken a number of actions designed to prevent future access to our environment and we will continue to monitor for threats and take precautionary steps as needed. We are subject to additional risks and uncertainties as a result of these events, including those described in the bullets below. While our forensic investigation is complete, there can be no assurance that we will be able to detect the existence or extent of the attacks on us or our customers or that our isolation and remediation efforts will be effective. As a result, we are unable to predict the overall impact of these events. Any perception by prospective or existing customers that the confidential information we maintain on their behalf is not secure could result in a material loss of business and revenue and damage our reputation and competitiveness. Furthermore, as described in the bullets below, these types of events often have cascading impacts that unfold over a lengthy period of time and may result in a loss of revenue, a diminution of our business prospects and incremental costs, including costs associated with litigation or investigations by regulatory authorities, any of which may adversely impact our financial results. It is also expected that we will continue to incur costs related to our response, remediation, and investigatory efforts relating to this security incident. While we have cyber insurance coverage, the

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amount of such insurance may be insufficient to compensate us for any expenses or losses that may result from the security incident and renewing cyber insurance coverage may be difficult and more costly.

Due to frequently changing attack techniques, along with an increased volume and sophistication of the attacks, we must continually monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access and we expend significant resources to respond to threats to security. To defend against threats to our systems and our customers’ confidential information, we must continuously invest in the development of more secure solutions and improve the security features of our solutions and the deployment of updates to address any security vulnerabilities. However, despite our efforts, we may fail to identify these new and complex methods of attack or fail to invest sufficient resources in security measures. In addition, as we increase our customer base and our brand becomes more widely known and recognized, we may become a more attractive target for malicious third parties. Furthermore, our solutions connect to, operate in conjunction with and are dependent on products and components across a broad ecosystem of third parties. If there is a security vulnerability in one of these third-party components, and a threat actor is successful in breaching that vulnerability, we could face increased costs, liability claims, reduced revenue, or harm to our reputation or competitive position for reasons beyond our control. Any breach of our security measures or disruption in our service as a result of third-party action, including criminal conduct by state actors and others, employee negligence, error, and/or malfeasance, defects or otherwise that compromises the confidentiality, integrity or availability of our data or our customers’ data, including as a result of our recent security incident, could result in:

• material loss of business and revenue;

• severe harm to our reputation, our brand or our competitiveness;

• a material degradation in the overall market perception of the security and reliability of our services;

• individual customer and/or class action lawsuits, which would cause us to incur significant legal fees and costs and could result in financial judgments against us;

• legal or regulatory enforcement action by state and federal authorities or non-U.S. authorities, which would cause us to incur legal fees and costs and could result in fines and/or penalties;

• mandatory regulatory disclosures regarding a security breach, unauthorized access to or disclosure of confidential information, which could lead to widespread negative publicity, which may cause our customers or prospects to lose confidence in the effectiveness of our data security measures;

• increased cybersecurity protection costs and insurance premiums; and/or

• additional costs associated with responding to the service interruption or security breach, such as investigative and remediation costs, the costs of providing individuals and/or data owners with notice of the breach, legal fees, the costs of any additional fraud detection activities, or the costs of prolonged system disruptions or shutdowns.

Any of these events could materially adversely impact our business and results of operations.

We seek to cap the liability to which we are exposed in the event of losses or harm to our customers, including those resulting from security incidents, but we cannot be certain that we will obtain these caps or that these caps, if obtained, will be enforced in all instances. Furthermore, the cybersecurity insurance we maintain may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover our remediation expenses or any claim against us for loss of data or other indirect or consequential damages. Defending any suit based on or related to any data loss or system disruption, regardless of its merit and available insurance coverage, could be costly and divert management’s attention.

The global COVID-19 pandemic, including the related containment efforts, has had, and will likely continue to have, certain negative impacts on our business and operations, and we are unable to predict with certainty the extent to which it may continue to adversely affect our business, results of operations and financial condition.

In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China, and since then has spread to Europe, the United States and most other countries. In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The COVID-19 pandemic continues to evolve, and to date has led to the implementation of various responses, including global government-imposed quarantines, stay-at-home orders, travel restrictions, mandated non-essential business closures, work stoppages, slowdowns and delays, work-from-home policies, supply chain disruption, and other public health safety measures, as well as volatility in stock prices, among other effects. COVID-19 infection rates declined somewhat during the late spring and summer of 2020 but increased dramatically in the fall and early winter of 2020 in many locations, which caused governments to reinstate, or consider reinstating, some restrictions. The widespread distribution of effective vaccines and continued containment efforts have helped substantially to stabilize infection rates, but, more recently, the rise in variants of the original virus has led to localized outbreaks in many locations, including in many of the countries in which we operate.

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The containment efforts imposed by many governments caused significant societal and economic disruption worldwide, including in all of the regions in which we operate our business and sell our products and services. Additionally, the COVID-19 pandemic and the governmental response and the resulting economic effect, impacted some industries, such as travel, hospitality and retail, more significantly than others. In response to the COVID-19 pandemic, we took a number of actions. These actions included, among others: (i) a decision to close all of our global offices, including our global headquarters in London, United Kingdom, and the resulting shift to a virtual work environment where all of our employees, including our global sales and customer support staff, are working remotely; (ii) a decision to limit and then ultimately ban all non-essential travel, including international travel; (iii) a decision to cancel or shift to virtual-only certain customer, industry and employee events; and (iv) the establishment of an employee support fund, funded in part by executive and employee donations, to offset the impact of the pandemic on our more vulnerable employees. The expected duration of these actions is uncertain. More recently, we have opened some of our global offices on a limited basis in accordance with government requirements, including our office in Lexington, Massachusetts and we plan to do the same at our headquarters in London, United Kingdom in August 2021. We expect, however, that the transition back to normal operations will take significant time, perhaps several months. We believe that the COVID-19 pandemic has negatively impacted and will continue to negatively impact our business and results of operations in a number of ways, including (i) an impact on the demand for our products and services caused by a decline in the rate of IT and security spending, a delay in purchasing decisions as IT and security staff focus on addressing the disruption to their businesses, and hiring freezes and reductions in workforce impacting our customers, which will impact sales to prospects and existing customers and increase customer attrition, especially since we offer our solutions on a per seat basis, (ii) restrictions on our global sales and marketing operations, including eliminating in-person sales activities, (iii) an impact on our employees’ ability to perform necessary business functions, including as a result of illness, family illness and general economic hardship, or as a result of restrictions on movement, including the necessity of working from home for an extended period, (iv) customers seeking extended payment terms or declaring bankruptcy or seeking to liquidate making collectability of accounts receivables difficult or impossible, (v) a disruption to our supply chain, particularly as it relates to hardware needed to expand existing data centers and planned data centers, (vi) continued currency volatility, and (vii) an increased risk of information or cybersecurity incidents and a failure to maintain the uninterrupted operation of our information systems due to, among other things, an increase in remote work. In addition, governmental authorities both in the United States and in Europe have adopted measures to provide economic assistance to businesses, to stabilize the markets and to support economic stability, and many governments are considering adopting additional measures to support their economies. The future success of these measures is unknown, and they may not be sufficient to mitigate the negative impact of the global COVID-19 pandemic. We have been closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our operations and the operations of our customers, suppliers, vendors and business partners and the impact it has on the safety and well-being of our employees, and may take further precautionary and preemptive actions as may be prudent or as required by government authorities.

Any of the negative impacts of the continuing global COVID-19 pandemic, including those described above, alone or in combination with others, may have a material adverse effect on our results of operations and financial condition. The extent to which the global COVID-19 pandemic will continue to adversely affect our business and results of operations will depend on numerous evolving factors and future developments that we are not able to predict, including the duration, spread and severity of the outbreak, including the potential that there could be recurring outbreaks in the future, the spread of new variants of the original virus, the nature and effectiveness of containment measures, the availability of treatments, the effectiveness and safety of available vaccines and the speed at which such vaccines are distributed and accepted by the public, the effect on the economy, unemployment, and IT and security spending in particular, and how quickly and to what extent normal economic and business operations can resume. Because our services are offered on a subscription basis, the effect of the pandemic may not be fully reflected in our operating results until future periods. If the global COVID-19 pandemic is prolonged, it could amplify the negative impacts on our business and results of operations, and may also heighten many of the other risks, including risk factors, described in this section and elsewhere in this Quarterly Report on Form 10-Q. It is also possible that any adverse impacts of the pandemic and containment measures may continue once the pandemic is controlled and the containment measures are lifted.

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If we are unable to attract new customers and retain existing customers, our business and results of operations will be affected adversely.

To succeed, we must continue to attract new customers and retain existing customers who desire to use our existing security, continuity and archiving offerings and new products we introduce from time to time. Acquiring new customers is a key element of our continued success, growth opportunity and future revenue. We will continue to invest in a direct sales force combined with a focused channel strategy designed to serve the various requirements of our target customer base and to bring new customers onto our cloud architecture. Any failures by us to execute in these areas will negatively impact our business. The rate at which new and existing customers purchase our products depends on a number of factors, including potential concerns related to our recent security incident and other factors outside of our control. For example, a deterioration in macroeconomic conditions in the markets we operate in as a result of the continuation of the global COVID-19 pandemic, a slower than expected recovery from the pandemic, or for other reasons could have a negative impact on our customers, which could adversely impact our ability to attract new customers and retain existing customers. In the past, negative macroeconomic conditions resulted in reductions in demand for IT-related capital spending generally and security solutions specifically, particularly in the financial services, legal and other industries that we target. Our future success also depends on retaining our current customers at acceptable retention levels. Our retention rates may decline or fluctuate as a result of a number of factors, including potential concerns related to our recently disclosed security incident. Our retention rates may also fluctuate as a result of factors outside our control, including competition, customers’ budgeting and spending priorities, and overall general economic conditions in the geographic regions in which we operate. For example, the impact of the COVID-19 pandemic on the current economic environment has caused, and may in the future cause, customers to request concessions including extended payment terms or better pricing. Customers may delay or cancel IT projects or seek to lower their costs by renegotiating existing vendor contracts. If our customers do not renew their subscriptions for our products and services, our revenue would decline and our business would suffer. In future periods, our total customers and revenue could decline or grow more slowly than we expect.

If we are unable to sell additional services, features and products to our existing customers, our future revenue and operating results will be harmed.

A significant portion of our revenue growth is generated from sales of additional services, features and products to existing customers. Our future success depends, in part, on our ability to continue to sell such additional services, features and products to our existing customers. We devote significant efforts to developing, marketing and selling additional services, features and products and associated support services to existing customers and rely on these efforts for a portion of our revenue. These efforts require a significant investment in building and maintaining customer relationships, as well as significant research and development efforts in order to provide upgrades and launch new services, features and products. The rate at which our existing customers purchase additional services, features and products depends on a number of factors, including the perceived need for additional security, continuity and archiving services, the efficacy of our current services, the perceived utility and efficacy of our new offerings, potential concerns related to our recent security incident, our customers’ IT budgets and general economic conditions in the geographic regions in which we operate, which may be impacted by the economic uncertainty resulting from the global COVID-19 pandemic. If our efforts to sell additional services, features and products to our customers are not successful, our future revenue and operating results will be harmed.

Our business depends substantially on customers renewing their subscriptions with us and a decline in our customer renewals would harm our future operating results.

In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions with us when the existing subscription term expires. Although the majority of our customer contracts include auto-renew provisions, our customers have no obligation to renew their subscriptions upon expiration, and we cannot provide assurance that customers will renew subscriptions at the same or higher level of service, if at all, particularly given the economic uncertainty resulting from the global COVID-19 pandemic. For each of the fiscal years ended March 31, 2021 and 2020, our customer retention rate has been consistently greater than 90%. We calculate customer retention rate as the percentage of paying customers on the last day of the relevant period in the prior year who remain paying customers on the last day of the relevant period in the current year. The rate of customer renewals may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction or dissatisfaction with our solutions, potential concerns related to our recent security incident, outages impacting our service, the effectiveness of our customer support services, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, or reductions in our customers’ spending levels or general economic conditions in the geographic regions in which we operate, which may be impacted by the economic uncertainty resulting from the global COVID-19 pandemic. If our customers do not renew their subscriptions, or renew on less favorable terms, our revenue may decline, and we may not realize improved operating results from our customer base.

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The markets in which we participate are highly competitive, with several large established competitors, and our failure to compete successfully would make it difficult for us to add and retain customers and would reduce or impede the growth of our business.

Our market is large, highly competitive, fragmented and subject to rapidly evolving technology, shifting customer needs and frequent introductions of new products and services. We currently compete with companies that offer products that target email, web and data security, awareness training, continuity, archiving, DMARC reporting, and digital brand protection, as well as large providers such as Google Inc. and Microsoft Corporation, which offer functions and tools as part of their core mailbox services that may be, or be perceived to be, similar to ours.

Our current and potential future competitors include:

• Email Security: Barracuda Networks, Inc., Google, Microsoft Exchange Online Protection, Proofpoint, Inc., Symantec Corporation, Agari Data, Inc., Cisco Systems Inc., Avanan, Inc., GreatHorn, Inc., IronScales, Ltd., INKY Technology Company, and Abnormal Security Corporation;

• Archiving: Dell EMC, Microsoft Office® 365®, Proofpoint, Inc., Veritas Technologies LLC, Smarsh Inc., Barracuda Networks, Inc., and Global Relay Communication, Inc.;

• Awareness training: KnowBe4, Inc., Cofense Inc., and Wombat Security, a division of Proofpoint, Inc.;

• Web security: Cisco Systems, Inc., Webroot Inc., TitanHQ’s Webtitan, SafeDNS, Inc., Akamai Technologies, Inc, Infoblox Inc., Forcepoint LLC, Trustwave Holdings, Inc., and Zscaler, Inc.;

• DMARC reporting: Agari Data, Inc., Valimail Inc., dmarcian, Inc., Ondemarc by Redsift Limited, and ReturnPath’s email fraud protection, a division of Proofpoint, Inc.; and

• Digital brand protection: RSA Security LLC, a division of Dell EMC, RiskIQ, Inc., and MarkMonitor Inc.

In addition, as we launch new products and services, we will face competition from new and existing competitors. We expect competition to increase in the future from both existing competitors and new companies that may enter our markets. Additionally, some potential customers, particularly large enterprises, may elect to develop their own internal products. If two or more of our competitors were to merge or partner with one another, the change in the competitive landscape could reduce our ability to compete effectively. Our continued success and growth depends on our ability to out-perform our competitors at the individual service level as well as increasing demand for a unified service infrastructure. We cannot guarantee that we will out-perform our competitors at the product level or that the demand for a unified service technology will increase.

Some of our current competitors have, and our future competitors may have, certain competitive advantages such as greater brand and name recognition, longer operating history, larger market share, larger existing user base and greater financial, technical and other resources. Some competitors may be able to devote greater resources to the development, promotion and sale of their products and services than we can to ours, which could allow them to respond more quickly than we can to new technologies and changes in customer needs. We cannot assure you that our competitors will not offer or develop products or services that are superior to ours or achieve greater market acceptance.

If we are unable to effectively increase sales of our services to large enterprises while mitigating the risks associated with serving such customers, our business, financial position and results of operations may suffer.

As we seek to increase our sales to large enterprise customers, we may face longer sales cycles, more complex customer requirements, unfavorable contractual terms, substantial upfront sales costs and less predictability in completing some of our sales than we do with smaller customers. In addition, our ability to successfully sell our services to large enterprises is dependent on us attracting and retaining sales personnel, including sales engineers, with experience in selling to large organizations. Also, because security breaches and disruptions of larger, more high-profile enterprises are likely to be heavily publicized, there is increased reputational risk associated with serving such customers. If we are unable to increase sales of our services to large enterprise customers while mitigating the risks associated with serving such customers, our business, financial position and results of operations may suffer.

Failure to effectively expand our sales and marketing capabilities could harm our ability to acquire new customers and achieve broader market acceptance of our services.

Acquiring new customers and expanding sales to existing customers will depend to a significant extent on our ability to expand our sales and marketing operations. We generate approximately one-fourth of our revenue from direct sales and we expect to continue to rely on our sales force to obtain new customers and grow revenue from our existing customer base. We expect to expand our global sales force, and we face a number of challenges in achieving our hiring goals. For instance, there is significant competition for sales personnel, including sales engineers, with the sales skills and technical knowledge that we require, including experience selling to large enterprise customers. In addition, training and integrating a large number of sales and marketing personnel in a short period of

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time requires the allocation of significant internal resources. Our ability to achieve projected growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel, all of which may be negatively impacted by the continuing global COVID-19 pandemic. We invest significant time and resources in training new sales personnel to understand our solutions. In general, new hires require significant training and substantial experience before becoming productive. Our recent hires and planned hires may not become as productive as we require, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we currently operate or where we seek to conduct business. Our growth may be materially and adversely impacted if the efforts to expand our sales and marketing capabilities are not successful or if they do not generate a sufficient increase in revenue.

Our business and results of operations may be negatively impacted by the United Kingdom’s withdrawal from the European Union.

The United Kingdom’s withdrawal from the European Union, or Brexit, became effective on January 31, 2020, and the transition period, or the Brexit transition period, during which time the United Kingdom and the European Union negotiated the terms of trade and other matters, ended on December 31, 2020. The United Kingdom and European Union have signed a European Union-United Kingdom Trade and Cooperation Agreement, or the TCA, which became effective in May 2021. Negotiations between the United Kingdom and the European Union are expected to continue in relation to certain elements of the trading relationship between the United Kingdom and the European Union. The ultimate effects of Brexit will depend, in part, on how the terms of the TCA take effect in practice and on any other agreements the United Kingdom may make with the European Union and many of the regulations that now apply in the United Kingdom following the Brexit transition period (including financial laws and regulations, tax, intellectual property rights, data protection laws, immigration  laws and employment laws), will likely be amended in future as the United Kingdom determines its new approach, which may result in significant divergence from European Union regulations. This lack of clarity on future United Kingdom laws and regulations and their interaction with the European Union laws and regulations increases our burden of operating in and doing business in the United Kingdom and the European Union and may affect our results of operations in a number of ways, including increasing currency exchange risk and disruptions in trade and the free movement of goods and services to and from the United Kingdom, generating instability in the global financial markets or negatively impacting the economies of the United Kingdom and Europe. In addition, because of our significant presence in the United Kingdom, it is possible that Brexit may impact some or all of our current operations, including transfers of our personal data and our customers’ personal data between our operations in the United Kingdom and our operations in the European Union. As a result, some of our European customers that are not based in the United Kingdom are requiring that we move their data from our United Kingdom data centers to our data centers based in Germany. Brexit may also impact our ability to freely move employees from our London headquarters to our other locations in Europe. The long-term effects of Brexit will depend in part on how the TCA, and any future agreements signed by the United Kingdom and the European Union, take effect in practice. We expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace. Any of these effects of Brexit, and others we cannot anticipate, could negatively impact our business and results of operations.

If we are unable to maintain successful relationships with our channel partners, our ability to acquire new customers could be adversely affected.

In order to grow our business, we anticipate that we will continue to depend on our relationships with our channel partners who we rely on, in addition to our direct sales force, to sell and support our services. In our three-month period ended June 30, 2021, while no individual channel partner accounted for 10% or more of our revenue, in the aggregate, our channel partners accounted for 75% of our revenue. We expect that sales to channel partners will continue to account for a substantial portion of our revenue for the foreseeable future. We utilize channel partners to efficiently increase the scale of our marketing and sales efforts, increasing our market penetration to customers which we otherwise might not reach on our own. Our ability to achieve revenue growth in the future will depend, in part, on our success in maintaining successful relationships with our channel partners, which includes ensuring that we make our service as easy to use by these channel partners as possible.

Our agreements with our channel partners are generally non-exclusive, meaning our channel partners may offer customers competitive services from different companies. If our channel partners do not effectively market and sell our services, choose to use greater efforts to market and sell their own products or services or those of others, or fail to meet the needs of our customers, our ability to grow our business, sell our services and maintain our reputation may be adversely affected. Our agreements with our channel partners generally allow them to terminate their agreements for any reason upon 90 days’ notice. The loss of key channel partners, our possible inability to replace them, or the failure to recruit additional channel partners could materially adversely affect our results of operations. If we are unable to maintain our relationships with these channel partners, our business, results of operations, financial condition or cash flows could be adversely affected.

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Any serious disruptions in our services caused by defects in our software or otherwise may cause us to lose revenue and market acceptance.

Our customers use our services for the most critical aspects of their business, and any disruptions to our services or other performance problems with our services, however caused, could hurt our brand and reputation and may damage our customers’ businesses. We provide regular updates, which may contain undetected errors when first introduced or released. In the past, we have discovered software errors, failures, vulnerabilities and bugs in our services after they have been released and new errors in our existing services may be detected in the future. Real or perceived errors, failures, system delays, interruptions, disruptions, vulnerabilities, or bugs could result in negative publicity, loss of or delay in market acceptance of our services, loss of competitive position, delay of payment to us, lower renewal rates, or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to mitigate or correct the problem. We seek to cap the liability to which we are exposed in the event of losses or harm to our customers, but we cannot be certain that we will obtain these caps or that these caps, if obtained, will be enforced in all instances. We carry insurance; however, the amount of such insurance may be insufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our services. As a result, we could lose future sales and our reputation and our brand could be harmed.

We provide service level commitments under our subscription agreements and service disruptions, including any related to our recent security incident, could obligate us to provide refunds and we could face subscription terminations, which could adversely affect our revenue.

Our subscription agreements with customers provide certain service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of downtime that exceed the periods allowed under our customer agreements, including as a result of our recently disclosed security incident or DDoS attacks, we could be required to pay refunds or face subscription terminations, either of which could significantly impact our revenue.

We have suffered significant service disruptions in the past and we cannot guarantee that future attacks or service disruptions will not occur. Any future attacks or significant service disruptions could adversely affect our reputation, our relationships with our existing customers and our ability to attract new customers, all of which would impact our future revenue and operating results.

We have acquired, and may acquire in the future, other businesses, products or technologies, which could require significant management attention, disrupt our business, dilute shareholder value and adversely affect our results of operations.

As part of our growth strategy and in order to remain competitive, we may acquire, or make investments in, complementary companies, products or technologies. Since fiscal 2017, we have completed several acquisitions. Notwithstanding these acquisitions, our acquisition experience to date remains relatively limited, and as a result, our ability as an organization to acquire and integrate other companies, products or technologies, particularly when the acquired entities are located in geographies where we have not previously done business, in a successful manner is unproven. We may not be able to find suitable acquisition targets, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by our customers, analysts and investors. In addition, if we are unsuccessful at integrating such acquisitions or the technologies associated with such acquisitions, our revenue and results of operations could be adversely affected. We may only be able to conduct limited due diligence on an acquired company’s technology, products and operations. Following an acquisition, we may be subject to liabilities arising from an acquired company’s past or present technology, product and operations, including liabilities related to data security and privacy of customer data and infringement of the intellectual property rights of others, and these liabilities may be greater than the warranty and indemnity limitations that we negotiate. Any liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquired business, including accounting charges. We may have to pay cash, incur additional debt, or issue equity securities to pay for any such acquisitions, each of which could adversely affect our financial condition or the value of our ordinary shares. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our shareholders. The incurrence of additional indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. See “The terms of our Credit Agreement require us to comply with certain financial covenants and impose restrictions on our business and operations, which creates default risks and reduces our flexibility” below.

In addition, as of June 30, 2021, we had $218.4 million in goodwill and intangible assets, net of accumulated amortization, recorded on our balance sheet as a result of our recent acquisitions. We will incur expenses related to the amortization of intangible assets and we may in the future need to incur charges with respect to the impairment of goodwill or intangible assets, which could adversely affect our operating results.

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If we are not able to provide successful updates, enhancements and features to our technology to, among other things, keep up with emerging cyber threats and customer needs, our business could be adversely affected.

Our industry is marked by rapid technological developments and demand for new and enhanced services and features to meet the evolving IT needs of organizations. In particular, cyber threats are becoming increasingly sophisticated and responsive to the new security measures designed to thwart them. If we fail to identify and respond to new and increasingly complex methods of attack and update our products to detect or prevent such threats, our business and reputation will suffer. The success of any new enhancements, features or services that we introduce depends on several factors, including the timely completion, introduction and market acceptance of such enhancements, features or services. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion. Furthermore, modifications to existing technologies will increase our research and development expenses. If we are unable to successfully enhance our existing services to meet customer requirements, increase adoption and usage of our services, or develop new services, enhancements, features and products, our business and operating results will be harmed.

Our quarterly results may fluctuate for a variety of reasons and may not fully reflect the underlying performance of our business.

Our quarterly operating results, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuations in quarterly results may negatively impact the value of our ordinary shares. Factors that may cause fluctuations in our quarterly financial results include, but are not limited to:

• foreign currency exchange rates;

• our ability to attract new customers;

• our net revenue retention rate;

• the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

• network outages or security breaches, including our recent security incident;

• general economic, industry and market conditions, including the continuing impact of the global COVID-19 pandemic, Brexit and economic conditions and societal unrest in South Africa;

• expenses related to litigation or regulatory matters;

• increases or decreases in the number of features in our services or pricing changes upon any renewals of customer agreements;

• changes in our pricing policies or those of our competitors;

• new variations in sales of our services, which has historically been highest in the fourth quarter of a given fiscal year;

• the timing and success of new services and service introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;

• restructuring expenses;

• the impact of acquisitions; and

• changes in our income tax rate.

We are subject to a number of risks associated with global sales and operations.

We operate a global business with offices located in the United States, the United Kingdom, South Africa, Australia and Germany, as well as several other locations. In the three-month period ended June 30, 2021, we generated 50% of our revenue from the United States, 28% from the United Kingdom, 11% from South Africa and 11% from the rest of the world. As a result, our sales and operations are subject to a number of risks and additional costs, including the following:

• fluctuations in exchange rates between currencies in the markets where we do business, which impacts our reportable revenue and expenses;

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• the disparate impact that the global COVID-19 pandemic is having on different countries and their economies;

• risks associated with trade restrictions and additional legal requirements, including those related to the exportation of our technology;

• the need to adapt our solutions for specific countries;

• greater risk of unexpected changes in regulatory rules, regulations and practices, tariffs and tax laws and treaties;

• compliance with multiple anti-bribery laws, including the United States Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act;

• heightened risk of unfair or corrupt business practices in certain geographies, and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;

• limited or uncertain protection of intellectual property rights in some countries and the risks and costs associated with monitoring and enforcing intellectual property rights abroad;

• greater difficulty in enforcing contracts and managing collections in certain jurisdictions, as well as longer collection periods;

• potential changes in trade relations arising from policy initiatives or other political factors that could negatively impact our purchases of technology among other things;

• management communication and integration problems resulting from cultural and geographic dispersion;

• social, economic and political instability, particularly in South Africa where the current economic environment is very challenging;

• terrorist attacks and security concerns in general; and

• complex and potentially adverse tax consequences.

All of the factors described above, including the previously described risks related to Brexit, and other factors could harm our ability to generate future global revenue and, consequently, materially impact our business, results of operations and financial condition.

If the prices we charge for our services are unacceptable to our customers, our operating results will be harmed.

As the market for our services matures, or as new or existing competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new customers at prices that are consistent with our pricing model and operating budget. If this were to occur, it is possible that we would have to change our pricing model or reduce our prices, which could harm our revenue, gross margin and operating results. Pricing decisions may also impact the mix of adoption among our subscription plans and negatively impact our overall revenue. Moreover, large enterprises, which may account for a larger portion of our business in the future, may demand substantial price concessions. Finally, the economic impact of the global COVID-19 pandemic may cause our prospects and existing customers to request price concessions to enable them to purchase our services or renew existing services. If we are, for any reason, required to reduce our prices, our revenue, gross margin, profitability, financial position and cash flow may be adversely affected.

Our research and development efforts may not produce new services or enhancements to existing services that result in significant revenue or other benefits in the near future, if at all.

We invested 19% and 19% of our revenue in research and development in our fiscal years ended March 31, 2021 and 2020, respectively. We expect to continue to dedicate significant financial and other resources to our research and development efforts in order to maintain our competitive position. However, investing in research and development personnel, developing new services and enhancing existing services is expensive and time-consuming, and there is no assurance that such activities will result in significant new marketable services, enhancements to existing services, design improvements, cost savings, revenue or other expected benefits. If we spend significant time and effort on research and development and are unable to generate an adequate return on our investment, our business and results of operations may be materially and adversely affected.

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We employ third-party licensed software for use in or with our services, and the inability to maintain these licenses or errors or vulnerabilities in the software we license could result in increased costs, reduced service levels, or security risk, which would adversely affect our business.

Our services incorporate and rely on certain third-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. In addition, integration of the software used in our services with new third-party software may require significant work and require substantial investment of our time and resources and delays in the release of our services until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. A licensor may have difficulties keeping up with technological changes or may stop supporting the software or other intellectual property that it licensed to us. Also, to the extent that our services depend upon the successful operation of third-party software in conjunction with our software, any undetected errors, defects or security vulnerabilities in this third-party software could prevent the deployment or impair the functionality of our services, delay new services introductions, result in a failure of our services, result in security breaches, and injure our reputation. Third-party software could also be used to launch an attack, also known as a supply chain attack, on our corporate and customer production systems resulting in service disruptions and security breaches. Our use of additional or alternative third-party software would require us to enter into additional license agreements with third parties on terms that may not be favorable to us.

Natural disasters, power loss, telecommunications failures and similar events could cause interruptions or performance problems associated with our information and technology infrastructure that could impair the delivery of our services and harm our business.

We currently store our customers’ information within third-party data center hosting facilities. As part of our current disaster recovery plans and arrangements, our production environment and all of our customers’ data is currently replicated in near real-time to a facility located in a different location. We cannot provide assurance that the measures we have taken to eliminate single points of failure will be effective to prevent or minimize interruptions to our operations. Our facilities are vulnerable to interruption or damage from a number of sources, many of which are beyond our control, including floods, fires, power loss, telecommunications failures, global pandemics such as COVID-19, the effects of climate change (such as drought, wildfires, increased storm severity and sea level rise), and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Any damage to, or failure of, our systems generally could result in interruptions to our service, which may reduce our revenue, cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers. Our business and reputation will also be harmed if our existing and potential customers believe our service is unreliable. The occurrence of a natural disaster, an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the disaster recovery arrangements, our service could be interrupted. As we continue to add data centers and add capacity in our existing data centers, we may move or transfer our data and our customers’ data. Any unsuccessful data transfers may impair the delivery of our service. Further, as we continue to grow and scale our business to meet the needs of our customers, additional burdens may be placed on our hosting facilities.

Actions we have taken to restructure our business to better align our resources with our strategy were costly and may not be as effective as anticipated.

In February 2021, we announced a restructuring plan designed to align our resources with our strategy. The restructuring plan, which included a reduction of our workforce by approximately 4%, was designed to permit us to increase investment in strategic growth areas. In connection with the restructuring, we recognized pre-tax charges to our financial results for the year ended March 31, 2021 of approximately $3.3 million, consisting of $3.7 million of severance and other one-time termination benefits, and other restructuring related costs, partially offset by $0.4 million of other adjustments. These charges were primarily cash-based. Restructuring charges during the three months ended June 30, 2021 were not material. The actions associated with the restructuring plan are now largely complete.

This type of restructuring activity may result in business disruptions and may not produce the full efficiency and cost reduction benefits anticipated. Furthermore, the benefits may be realized later than expected and the cost of implementing these measures may be greater than anticipated. If these measures are not successful, we may need to undertake additional cost reduction efforts, which could result in future charges. Moreover, the restructuring plan may cause business disruptions with customers and elsewhere if our cost reduction efforts prove ineffective, and our business may not be more efficient or effective than prior to the implementation of the plan. Our restructuring activities, including the related charges and the impact of the related workforce reduction, which may include potential legal claims by impacted employees, could have a material adverse effect on our business, operating results and financial condition.

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Legal and Regulatory Risks

Our failure to comply with evolving data privacy, data protection and cloud computing regulations, cross-border data transfer restrictions and other domestic or foreign laws and regulations may result in substantial liability and may limit the use and adoption of, or require modifications to, our products and services, all of which could reduce our revenue, harm our operating results and adversely affect our business.

Given the nature and global reach of our business, including our operations in the United States, our corporate headquarters and operations in London, United Kingdom, our operations in Germany, South Africa and elsewhere, as well as the types of information our customers store on our systems, evolving data privacy and data protection laws and regulations around the world that impose requirements on us as well as our customers will continue to significantly impact our business.

Federal, state and foreign governments continue to adopt new laws and regulations addressing data privacy and data security regarding the collection, processing, transfer, storage and use of personal information that affect the provision of cloud services. For example, in the United States, these include laws and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the Graham-Leach-Bliley Act of 1999, as well as numerous state breach notification and data privacy laws, and regulator enforcement positions and expectations reflected in federal and state regulatory actions, settlements, consent decrees and guidance documents. In January 2020, the California Consumer Privacy Act of 2018, or CCPA, became effective. The CCPA governs the collection, sale and use of California consumers’ (i.e., California residents’) personal information (as that term is broadly defined by the CCPA), and it has significant impacts on businesses’ handling of personal information and existing privacy policies and procedures. The CCPA gives California consumers expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used by requiring covered entities to provide new disclosures to California consumers and provide such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. In November 2020, California residents voted to approve a ballot proposition that creates the California Privacy Rights Act, or CPRA, that amends and expands the CCPA to further enhance privacy protections for California residents. The CCPA may subject us to regulatory fines by the State of California, individual claims, and increased commercial liabilities. In addition, the CCPA, as well as data privacy laws that have been proposed or enacted in other U.S. states, may limit our or our customers’ ability to use, process and store certain data, which may decrease adoption of our services, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

Internationally, almost every jurisdiction in which we operate has established its own data security, data protection and data privacy legal frameworks with which we, or our customers, must comply, including the European Union General Data Protection Regulation, or the GDPR. The GDPR applies to any company established in the European Union as well as to those outside the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior. The GDPR has enhanced data protection obligations for data controllers of personal data, including, for example, expanded disclosures about how personal data is to be used, limitations on retention of personal data, and mandatory personal data breach notification requirements. The GDPR also imposes onerous obligations and liabilities on service providers or data processors. Under the GDPR, regulatory fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be imposed. In addition, data subjects can claim damages resulting from violations of the GDPR. The GDPR further grants non-profit organizations the right to bring claims on behalf of data subjects. Following the end of the Brexit transition period on December 31, 2020, the GDPR was adopted in the United Kingdom and is referred to as the ‘UK GDPR’, but there may be further developments about the regulation that may impact data protection and data privacy considerations in the United Kingdom. In South Africa, the Protection of Personal Information Act (“POPIA”) became enforceable as of July, 2021.  Similar to the GDPR, the regulation imposes obligations and restrictions on the collection, processing, storage and use of personal information in South Africa.  It also restricts the transfer of personal information outside of South Africa unless certain conditions are satisfied.  Failure to comply with POPIA would result in regulatory penalties and fines, as well as claims for damages by data subjects.  As a result, our customers subject to POPIA may require additional contractual protections from us.    

Given the breadth and depth of changes in data privacy and data protection regulations, complying with the various requirements has caused us to expend significant resources and such expenditures are likely to continue into the future as we respond to new interpretations and enforcement actions and as we continue to negotiate data processing agreements with our customers and business partners. In addition, our recent security incident implicated the regulatory notification requirements applicable to us. As a result, our actions with respect to such notifications could be subject to regulatory fines and reputational damage, either of which could harm our operating results and adversely affect our business.

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To facilitate and legitimize the transfer of both customer and personal data from the European Union and the United Kingdom to the United States, we have relied on the frameworks promulgated by the European Union, Swiss and U.S. authorities, including the EU-U.S. Safe Harbor Framework, EU-U.S. Privacy Shield Framework, and the Swiss-U.S. Privacy Shield Framework While these frameworks have now been invalidated by European authorities, we remain certified under the EU-U.S. and the Swiss-U.S. Privacy Shield frameworks and our obligations thereunder remain in effect. In its decision in July 2020 invalidating the EU-U.S. Privacy Shield Framework, the Court of Justice of the European Union (“CJEU”) affirmed that personal data transfers from the EEA to the United States pursuant to standard contractual clauses, or SCCs, remain a valid transfer mechanism, subject to a requirement that the supervisory authorities in member states continue to review the adequacy of the protection afforded by the SCCs. In June 2021, the European Commission adopted a new set of SCCs providing additional clarity for cross-border transfers of data.  Because of the CJEU affirmation, the new SCCs, and the position of the authorities in the United Kingdom to align with European data privacy regulations, we believe that personal data transfers among our global affiliates in accordance with the SCCs comply with applicable European and United Kingdom personal data transfer requirements. However, there is uncertainty associated with the new SCCs, including obligations related to governmental access requests and concerns around new or renegotiated contractual terms with our customers.  Further, if these SCCs  are ultimately determined to provide inadequate protection for personal data transfers between the European Union, the United Kingdom and the United States, we will be required to identify and implement alternative solutions to ensure that we comply with European and United Kingdom personal data transfer requirements. If we fail to comply fully with privacy laws in the European Union and the United Kingdom, the data protection authorities might impose upon us a number of different sanctions, including fines and restrictions on international personal data transfers.

Data privacy and data protection laws and regulations are subject to new and differing interpretations and there may also be significant inconsistency in laws and regulations throughout the jurisdictions in which we operate or offer our services. Legal and other regulatory requirements could restrict our ability to store and process personal data as part of our services, or, in some cases, impact our ability to offer our services in certain jurisdictions. Such laws and regulations may also impact our customers' ability to deploy certain of our services globally, to the extent they utilize our services for processing personal data. Our strategy in gaining insights from the data we collect as part of our services, particularly threat data, is becoming important to the value of the services we deliver to our customers and to our operational efficiency. Our use of data in this way may be constrained by contractual restrictions or regulatory developments. In addition, in many cases these data privacy and data protection laws and regulations apply not only to transfers of personal data to third parties, but also within an enterprise, including our company or our customers. Finally, if third parties that we engage for the provision of certain functions of our services violate applicable data privacy and data protection laws or regulations or our policies or requirements, such violations may also put our customers’ information at risk which could in turn have an adverse effect on our business.

The costs of compliance with, and other burdens imposed by, data privacy and data protection laws and regulations may require resources to create new services or modify existing services, the failure of which could lead to us being subject to significant fines, penalties or liabilities for noncompliance, and may slow the pace at which we close sales transactions, any of which could harm our business. Compliance with applicable laws and regulations regarding personal data may also require changes in our services that result in increased costs and reduced efficiency. Failure to comply with existing or new data privacy and data protection laws and regulations may result in significant fines or orders to stop the alleged noncompliant activity, as well as negative publicity. Customer may also attempt to terminate our agreements with them or sue us for breach of the data protection provisions of those agreements. As a result, failure to comply with evolving data privacy, data protection and cloud computing regulations may harm our business and our results of operations.

We are subject to governmental export controls and funds dealings restrictions that could impair our ability to compete in certain international markets and subject us to liability if we are not in full compliance with applicable laws.

Our software and services may be subject to export controls and we may also be subject to restrictions or prohibitions on transactions with, or on dealing in funds transfers to/from, certain embargoed jurisdictions and sanctioned persons and entities, pursuant to the U.K. Export Control Organisation’s restrictions, the U.K. Treasury’s restrictions, the European Union Council Regulations, the United States Department of Commerce’s Export Administration Regulations, the economic and trade sanctions regulations administered by the United States Treasury Department’s Office of Foreign Assets Controls and United States Department of State, and similar laws that may apply in other jurisdictions in which we operate or sell or distribute our services. Export control and economic sanctions laws include prohibitions on the sale or supply of certain products and services to certain embargoed or sanctioned countries, regions, governments, persons and entities, as well as restrictions or prohibitions on dealing in funds to/from those countries, regions, governments, persons and entities. In addition, various countries regulate the import of certain encryption items and technology through import permitting and licensing requirements and have enacted laws that could limit our ability to distribute our services or could limit our customers’ ability to implement our services in those countries.

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The exportation, re-exportation, and importation of our software and services, including by our channel partners, must comply with applicable laws or else we may be adversely affected, through reputational harm, government investigations, penalties, and/or a denial or curtailment of our ability to export our services. Although we take precautions to prevent our services from being provided in violation of such laws, our services may have been in the past, and could in the future be, provided in violation of such laws.

If we are found to be in violation of United States sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us, including civil penalties over $300,000, or twice the value of the transaction, whichever is greater, per violation, and in the event of conviction for a criminal violation, fines of up to $1 million and possible incarceration for responsible employees and managers for willful and knowing violations. Under the terms of applicable regulations, each instance in which a company provides goods or services, or otherwise acts in violation of export control and sanctions laws, may be considered a separate violation. If we are found to be in violation of U.K. sanctions or export controls, it could also result in unlimited fines for us and responsible employees and managers, as well as imprisonment of up to two years for responsible employees and managers.

Changes in our software or services, or changes in export, sanctions or import laws, may delay the introduction and sale of our services in certain markets, prevent our customers with global operations from deploying our software or services or, in some cases, prevent the export or import of our software or services to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and operating results.

We may become involved in other litigation that may materially adversely affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including patent, commercial, product liability, data security, contract disputes, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our results of operations. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations and prospects.

Human Capital Risks

We are dependent on the continued services and performance of our key employees, including our co-founder, the loss of whom could adversely affect our business.

Our future performance depends upon contributions from our senior management team and, in particular, our co-founder, Peter Bauer, our Chairman and Chief Executive Officer. If our senior management team, including any new hires that we may make, fails to work together effectively and to execute on our plans and strategies on a timely basis, our business could be harmed. The loss of one or more of our executive officers or key employees could have an adverse effect on our business. The loss of services of Mr. Bauer could significantly delay or prevent the achievement of our strategic objectives.

We depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate qualified personnel, our business may be adversely impacted.

Our success depends largely upon our continued ability to identify, hire, develop, motivate and retain highly skilled personnel, including senior management, engineers, software developers, sales representatives and customer support representatives. Our growth strategy also depends, in part, on our ability to continue to attract and retain highly skilled personnel. Identifying, recruiting, training and integrating qualified individuals requires significant time, expense and attention of management. Competition for these personnel is intense, especially for engineers experienced in designing and developing software and software as a service applications, and for experienced enterprise sales professionals. In addition, the global COVID-19 pandemic has made hiring more difficult, particularly when the hiring process, from sourcing to interviewing to onboarding to training, must be done remotely. We have, from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the actual or perceived value of our equity awards declines, or experiences significant volatility, it may adversely affect our ability to recruit and retain key employees. If we are not able to effectively recruit and retain qualified employees, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed.

Our recent workforce reduction could negatively impact our future hiring plans and employees who are not impacted, which may adversely affect our business.

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The workforce reductions made in connection with the restructuring we announced in February 2021 may adversely affect our ability to attract and retain highly skilled employees. Even if our key employees were not directly affected by these reductions, the termination of others may have a negative impact on morale and our culture and our ability to retain current employees, as well as our ability to attract qualified new employees in the future.

Risks Related to Intellectual Property

We are currently being sued, have been sued in the past, and may in the future be sued by third parties for alleged infringement of their proprietary rights.

There is considerable patent and other intellectual property development activity in our industry. Our success depends, in part, on our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities, including non-practicing patent entities, or NPEs, which are entities that have no operating business but exist purely as collectors of patents, and individuals, may own or claim to own intellectual property relating to our industry. Patent and other intellectual property disputes are common and third parties are currently claiming, have claimed, and may in the future claim that we are infringing upon their intellectual property rights or send us letters proposing that we license certain of their patents. In particular, there are a number of NPEs in the security industry that are particularly aggressive about pursuing alleged infringement of their patents. Given this and the proliferation of lawsuits in our industry and other similar industries by both NPEs and operating entities, we have been sued for patent infringement and expect that we may be sued by others at some point in the future, regardless of the merits of any such lawsuits. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q. We closely monitor all such claims and respond as appropriate. We may also be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require that we comply with other unfavorable terms. Under all of our sales contracts, we are obligated to indemnify our customers and channel partners against third-party infringement claims, and we may also be obligated to pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify services or refund fees, any of which could be costly. Even if we were to prevail in any such dispute, litigation regarding intellectual property is very costly and time-consuming and diverts the attention of our management and key personnel from our business operations.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

Our success and ability to compete depend in part on our intellectual property. We primarily rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. As of June 30, 2021, we had 34 patents issued and 18 patent applications pending in the United States. We also had one patent issued in the United Kingdom. We may not be able to obtain any further patents, and our pending applications may not result in the issuance of patents. We have issued patents and pending patent applications outside the United States, and we may have to expend significant resources to obtain additional patents as we expand our international operations due to the cost of monitoring and protecting our rights across multiple jurisdictions.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Failure to adequately enforce our intellectual property rights could also result in the impairment or loss of those rights. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Patent, copyright, trademark and trade secret laws offer us only limited protection and the laws of many of the countries in which we sell our services do not protect proprietary rights to the same extent as the United States and Europe. Accordingly, defense of our trademarks and proprietary technology may become an increasingly important issue as we continue to expand our operations and solution development into countries that provide a lower level of intellectual property protection than the United States or Europe. Policing unauthorized use of our intellectual property and technology is difficult and the steps we take may not prevent misappropriation of the intellectual property or technology on which we rely. For example, in the event of inadvertent or malicious disclosure of our proprietary technology, trade secret laws may no longer afford protection to our intellectual property rights in the areas not otherwise covered by patents or copyrights. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Our failure to secure, protect and enforce our intellectual property rights could materially adversely affect our brand and our business.

We may elect to initiate litigation in the future to enforce or protect our proprietary rights or to determine the validity and scope of the rights of others. That litigation may not be ultimately successful and could result in substantial costs to us, the reduction or loss in intellectual property protection for our technology, the diversion of our management’s attention and harm to our reputation, any of which could materially and adversely affect our business and results of operations.

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Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

We have devoted substantial resources to the development of our technology, business operations and business plans. In order to protect our trade secrets and proprietary information, we rely in significant part on confidentiality arrangements with our employees, licensees, independent contractors, advisers, channel partners, resellers and customers. These arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, if others independently discover trade secrets and proprietary information, we would not be able to assert trade secret rights against such parties. Effective trade secret protection may not be available in every country in which our services are available or where we have employees or independent contractors. The loss of trade secret protection could make it easier for third parties to compete with our solutions by copying functionality. In addition, any changes in, or unexpected interpretations of, the trade secret and employment laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may be subject to damages resulting from claims that our employees or contractors have wrongfully used or disclosed alleged trade secrets or confidential information of their former employers or other parties.

We could in the future be subject to claims that employees or contractors, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our competitors or other parties. Litigation may be necessary to defend against these claims. If we fail in defending against such claims, a court could order us to pay substantial damages and prohibit us from using technologies or features that are essential to our solutions, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of these parties. In addition, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market and support potential solutions or enhancements, which could severely harm our business. Even if we are successful in defending against these claims, such litigation could result in substantial costs and be a distraction to management.

The use of open source software in our offerings may expose us to additional risks, including security risks, and harm our intellectual property.

Open source software is typically freely accessible, usable and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licenses require the user of such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost. This can subject previously proprietary software to open source license terms.

We monitor and control our use of open source software in an effort to avoid unanticipated conditions or restrictions on our ability to successfully commercialize our products and solutions and believe that our compliance with the obligations under the various applicable licenses has mitigated the risks that we have triggered any such conditions or restrictions. However, such use may have inadvertently occurred in the development and offering of our products and solutions, particularly in situations where we acquired technology from third parties through acquisitions. Additionally, if a third-party software provider has incorporated certain types of open source software into software that we have licensed from such third-party, we could be subject to the obligations and requirements of the applicable open source software licenses. This could harm our intellectual property position and have a material adverse effect on our business, results of operations and financial condition.

The terms of many open source software licenses have not been interpreted by United States or foreign courts, and there is a risk that those licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to successfully commercialize our products and solutions. For example, certain open source software licenses may be interpreted to require that we offer our products or solutions that use the open source software for no cost; that we make available the source code for modifications or derivative works we create based upon, incorporating or using the open source software (or that we grant third parties the right to decompile, disassemble, reverse engineer, or otherwise derive such source code); that we license such modifications or derivative works under the terms of the particular open source license; or that otherwise impose limitations, restrictions or conditions on our ability to use, license, host, or distribute our products and solutions in a manner that limits our ability to successfully commercialize our products.

We could, therefore, be subject to claims alleging that we have not complied with the restrictions or limitations of the applicable open source software license terms or that our use of open source software infringes the intellectual property rights of a third party. In that event, we could incur significant legal expenses, be subject to significant damages, be enjoined from further sale and distribution of our products or solutions that use the open source software, be required to pay a license fee, be forced to reengineer our products

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and solutions, or be required to comply with the foregoing conditions of the open source software licenses (including the release of the source code to our proprietary software), any of which could adversely affect our business. Even if these claims do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could harm our business, results of operations, financial condition and reputation.

Additionally, the use of open source software can lead to greater risks than the use of third-party commercial software, as open source software does not come with warranties or other contractual protections regarding indemnification, infringement claims or the quality of the code. Open source software may also include malicious code or security vulnerabilities.

Financial Risks

Because we recognize revenue from subscriptions for our services over the term of the agreement, downturns or upturns in new business may not be immediately reflected in our operating results and may be difficult to discern.

We generally recognize subscription revenue from customers ratably on a straight-line basis over the terms of their subscription agreements, which are typically one year in duration. As a result, most of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscription agreements entered into during the previous fiscal year or quarter. Consequently, a decline in new or renewed subscriptions with yearly terms in any one quarter may have a small impact on our operating revenue results for that quarter. However, such decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services, resulting from the impact of the global COVID-19 pandemic, our recent security incident, or otherwise, and potential changes in our pricing and packaging policies or retention rate may not be fully reflected in our operating results until future periods. Shifts in the mix of annual versus monthly subscription billings may also make it difficult to assess our business. We may also be unable to reduce our cost structure in line with a significant deterioration in sales. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers is recognized over the applicable subscription term.

We have incurred net losses in the past, and we may not be able to sustain profitability for the foreseeable future.

Historically, we have incurred periods of net income and net losses. As of June 30, 2021, we had an accumulated deficit of $43.8 million. We have been growing rapidly, and, as we do so, we incur significant sales and marketing, support, research and development and other related expenses. Our ability to sustain profitability will depend in significant part on our obtaining new customers, expanding our existing customer relationships and ensuring that our expenses, including our sales and marketing expenses and the cost of supporting new customers, does not exceed our revenue. We also expect to make significant expenditures and investments in research and development to expand and improve our services and technical infrastructure. In addition, as a public company, we expect to continue to incur significant legal, accounting and other expenses. These increased expenditures may make it harder for us to maintain profitability and we cannot predict when we will achieve sustained profitability, if at all. We also may incur net losses in the future for a number of other unforeseen reasons. Accordingly, we may not be able to maintain profitability, and we may incur losses in the foreseeable future.

Fluctuations in currency exchange rates could adversely affect our business.

The functional currency of our operating subsidiaries is generally the local currency of each entity and our reporting currency is the U.S. dollar. For the three-month period ended June 30, 2021, 53% of our revenue was denominated in U.S. dollars, 26% in British pounds, 11% in South African rand and 11% in other currencies. Given that the functional currency of our subsidiaries is generally the local currency of each entity, but our reporting currency is the U.S. dollar, fluctuations in currency exchange rates between the U.S. dollar and each of the British pound, the South African rand and the Australian dollar could materially and adversely affect our business. There may be instances in which costs and revenue will not be matched with respect to currency denomination. We estimate that a 10% increase or decrease in the value of the British pound against the U.S. dollar would have decreased or increased our income from operations by approximately $0.4 million in the three-month period ended June 30, 2021 and that a 10% increase or decrease in the value of the South African rand against the U.S. dollar would have increased or decreased our income from operations by approximately $0.9 million in the three-month period ended June 30, 2021. To date, we have not entered into any currency hedging contracts. As a result, to the extent we continue our expansion on a global basis, we expect that increasing portions of our revenue, cost of revenue, assets and liabilities will be subject to fluctuations in currency valuations. We may experience economic loss and a negative impact on earnings or net assets solely as a result of currency exchange rate fluctuations.

The global COVID-19 pandemic has had and may continue to have an impact on currency exchange rate volatility, which could impact our results of operations and make our internal financial forecasting difficult. In addition, Brexit may continue to have a significant impact on currency exchange rates and the global and European economy generally. The outcome of the referendum and

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the resulting uncertainty regarding the status of the United Kingdom’s withdrawal from the European Union caused volatility in global stock markets and foreign currency exchange rate fluctuations, including the strengthening of the U.S. dollar against the British pound and the Euro, which may continue or worsen now that the withdrawal has occurred and the Brexit transition period ended on December 31, 2020. Finally, the South African economy faces a number of challenges, including slow economic growth and high unemployment. These challenges combined with the continuing impact of the global COVID-19 pandemic have made the South African rand highly volatile over the past year. As described above, significant fluctuations in currency exchange rates between the South African rand and the U.S. dollar will impact our results of operations.

The terms of our Credit Agreement require us to comply with certain financial covenants and impose restrictions on our business and operations, which creates default risks and reduces our flexibility.

In July 2018, we entered into the Credit Agreement by and among us, certain of our subsidiaries party thereto, as guarantors, certain financial institutions party thereto from time to time, as lenders, and the Administrative Agent. The Credit Agreement provided us with a $100.0 million senior secured term loan and a $50.0 million senior secured revolving credit facility. We amended the Credit Agreement in June 2020. The Credit Agreement requires compliance with significant financial and non-financial covenants, including affirmative covenants relating to the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters and negative covenants, including, among others, restrictions on the incurrence of certain indebtedness, granting of liens, making investments and acquisitions, mergers and consolidations, paying dividends, entering into affiliate transactions and asset sales. The Credit Agreement also provides for a number of events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, default under material indebtedness (other than the Credit Agreement), change of control and judgment defaults.

As a result of the negative covenants, we may be restricted from engaging in business or operating activities that may otherwise improve our business or from financing future operations or capital needs. Failure to comply with the covenants, including the financial covenants, if not cured or waived, will result in an event of default that could trigger acceleration of our indebtedness, which would require us to repay all amounts owing under our Credit Agreement and could have a material adverse impact on our business. Overdue amounts under the Credit Agreement accrue interest at a default rate. We cannot be certain that our future operating results will be sufficient to ensure compliance with the financial covenants in our Credit Agreement or to remedy any defaults. In addition, in the event of any event of default and related acceleration, we may not have or be able to obtain sufficient funds to make the accelerated payments required under the Credit Agreement. For more information on the Credit Agreement, see Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

If we need to raise additional capital to expand our operations and invest in new technologies in the future and cannot raise it on acceptable terms or at all, our ability to compete successfully may be harmed.

We believe that our existing cash and cash equivalents together with available capacity under our Credit Facility will be sufficient to meet our anticipated cash requirements for at least the next twelve months. However, unforeseen circumstances may arise which may mean that we may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all, or because of restrictions in our Credit Agreement. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests and the value of our ordinary shares could decline. If we engage in additional debt financing, we may be required to obtain the Administrative Agent’s consent and/or accept terms that are more restrictive than the terms currently applicable to us under the Credit Agreement. If we need additional capital and cannot raise it on acceptable terms, if at all, we may not be able to, among other things:

• develop and enhance our services;

• continue to expand our research and development, and sales and marketing organizations;

• hire, train and retain key employees;

• respond to competitive pressures or unanticipated working capital requirements; or

• pursue acquisition opportunities.

Our inability to do any of the foregoing could reduce our ability to compete successfully and harm our results of operations.

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We must maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our ordinary shares.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, and the related rules adopted by the SEC, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting on an annual basis. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.

In addition, our independent registered public accounting firm must attest to the effectiveness of our internal control over financial reporting under Section 404. Our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. We may not be able to remediate any future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion. We are also required to disclose significant changes made in our internal control procedures on a quarterly basis. Our compliance with Section 404 requires that we incur substantial accounting expense and expend significant management efforts.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to assert that our internal control over financial reporting is effective or our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls when it is required to issue such opinion, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our ordinary shares could decline, and we could be subject to sanctions or investigations by the Nasdaq Global Select Market, the SEC or other regulatory authorities.

Tax Risks

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and results of operations. In addition, the authorities in these jurisdictions could review or audit our tax returns and general tax compliance and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries. Furthermore, one or more jurisdictions in which we do not believe we are currently subject to tax payment, withholding, or filing requirements, could assert that we are subject to such requirements. Any of these claims or assertions could have a material impact on us and the results of our operations, including our cash flow. In addition, as a result of efforts by governments to address the continuing global COVID-19 pandemic, among other considerations, we believe that there will be legislation to increase corporate tax rates in many of the jurisdiction in which we conduct business, including in the United Kingdom and in the United States. Such legislation, if enacted, could negatively impact our financial results.

A change in our tax residence could have a negative effect on our future profitability.

Although we are organized under the laws of the Bailiwick of Jersey, our affairs are, and are intended to continue to be, managed and controlled in the United Kingdom for tax purposes and therefore we are resident in the United Kingdom for U.K. and Jersey tax purposes. It is possible that in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a result of any change in the conduct of our affairs or for any other reason, we could become, or be regarded as having become, a resident in a jurisdiction other than the United Kingdom. If we cease to be a U.K. tax resident, we may be subject to a charge to U.K. corporation tax on chargeable gains on our assets and to unexpected tax charges in other jurisdictions on our income. Similarly, if the tax residency of any of our subsidiaries were to change from their current jurisdiction for any of the reasons listed above, we may be subject to a charge to local capital gains tax on the assets.

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Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

We conduct operations world-wide through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between us and our subsidiaries. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arm’s length and that appropriate documentation is maintained to support the transfer pricing. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows. Double taxation should be mitigated in these circumstances where the affiliated parties that are subject to the transfer pricing adjustments are able to benefit from any applicable double taxation agreement.

Our ability to use our net operating loss or tax credit carry forwards may be subject to limitation.

As of June 30, 2021, we had net operating loss carryforwards in the U.K., U.S. federal and state, Australia, Germany, Israel, and Canada.  U.S. federal net operating losses generated through the fiscal year ending March 31, 2018 expire at various dates through 2038 while U.S. federal net operating losses generated after March 31, 2018 do not expire. Substantially all U.S. state net operating loss carryforwards expire at various dates through 2041. Net operating losses in Canada expire in 2041. Net operating loss carryforwards in the U.K., Australia, Germany and Israel do not expire. As of June 30, 2021, we had U.K. income tax credit carryforwards that do not expire. As of June 30, 2021, we had Israel income tax credit carryforwards that expire at various dates from 2024 through 2026.

Each jurisdiction in which we operate may have its own limitations on our ability to utilize net operating loss or tax credit carryforwards generated in that jurisdiction that may increase our U.K. and/or foreign income tax liability.

Under Section 382 of the U.S. Internal Revenue Code of 1986, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change income and taxes may be limited. In general, an ownership change occurs if there is a 50 percent cumulative change in ownership of the company over a rolling three-year period. Similar rules may apply under U.S. state tax laws. We believe that we have experienced an ownership change in the past and may experience ownership changes in the future resulting from future transactions in our share capital, some of which may be outside our control. Based on the most recent analysis, we do not anticipate a material limitation on the utilization of our tax attributes. However, our ability to utilize net operating loss carryforwards or other tax attributes to offset U.S. federal and state taxable income in the future may be subject to future limitations.

U.S. holders of our ordinary shares could be subject to material adverse tax consequences if we are considered a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes.

We do not believe that we were a PFIC for U.S. federal income tax purposes during the tax year ending March 31, 2021 and do not expect to be a PFIC for U.S. federal income tax purposes in the current tax year. We also do not expect to become a PFIC in the foreseeable future, but the possible status as a PFIC must be determined annually and therefore may be subject to change. If we are at any time treated as a PFIC, such treatment could result in a reduction in the after-tax return to U.S. holders of our ordinary shares and may cause a reduction in the value of such shares. Furthermore, if we are at any time treated as a PFIC, U.S. holders of our ordinary shares could be subject to greater U.S. income tax liability than might otherwise apply, imposition of U.S. income tax in advance of when tax would otherwise apply and detailed tax filing requirements that would not otherwise apply. For U.S. federal income tax purposes, “U.S. holders” include individuals and various entities. A corporation is classified as a PFIC for any taxable year in which (i) at least 75% of its gross income is passive income or (ii) at least 50% of the average quarterly value of all its total gross assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income includes certain dividends, interest, royalties and rents that are not derived in the active conduct of a trade or business. The PFIC rules are complex and a U.S. holder of our ordinary shares is urged to consult its own tax advisors regarding the possible application of the PFIC rules to it in its particular circumstances.

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Risks Related to Owning Our Ordinary Shares and Our Organization in Jersey, Channel Islands

Our share price has been and may continue to be volatile.

The market price of our ordinary shares may decline. In addition, the market price of our ordinary shares could be highly volatile and may fluctuate substantially as a result of many factors, many of which we cannot control, including:

• the ongoing global impact of the continuing COVID-19 pandemic and the impact on our business;

• actual or anticipated fluctuations in our results of operations;

• variance in our financial performance from the expectations of market analysts;

• announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans;

• changes in the prices of our services or those of our competitors;

• our involvement in litigation, including patent litigation;

• security breaches, including our recent security incident, and litigation and regulatory investigations resulting from such breaches;

• our sale of ordinary shares or other securities in the future;

• market conditions in our industry;

• changes in key personnel;

• the trading volume of our ordinary shares;

• changes in the estimation of the future size and growth rate of our markets; and

• general economic and market conditions, both in the United States and internationally.

In addition, the stock markets have recently experienced extreme price and volume fluctuations, both as a result of the global COVID-19 pandemic and for other reasons. Broad market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted.

If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares could decrease, which could cause our share price and trading volume to decline.

We do not expect to pay dividends and investors should not buy our ordinary shares expecting to receive dividends.

We do not anticipate that we will declare or pay any dividends in the foreseeable future, and our ability to do so may be constrained by restrictions in our Credit Agreement or future debt arrangements, if any, and by Jersey law. Consequently, investors will only realize an economic gain on their investment in our ordinary shares if the price appreciates. Investors should not purchase our ordinary shares expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in sustaining an orderly trading market for our shares, then investors may not have any manner to liquidate or receive any payment on their investment. Therefore, our failure to pay dividends may cause investors to not see any return on their investment even if we are successful in our business operations.

U.S. shareholders may not be able to enforce civil liabilities against us.

Certain of our directors and executive officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against them judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States.

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There is also a doubt as to the enforceability in England and Wales and Jersey, whether by original actions or by seeking to enforce judgments of U.S. courts, of claims based on the federal securities laws of the United States. In addition, punitive damages in actions brought in the United States or elsewhere may be unenforceable in England and Wales and Jersey.

The rights afforded to shareholders are governed by Jersey law. Not all rights available to shareholders under English law or U.S. law will be available to shareholders.

The rights afforded to shareholders will be governed by Jersey law and by our Articles of Association, and these rights differ in certain respects from the rights of shareholders in typical English companies and U.S. corporations. In particular, Jersey law significantly limits the circumstances under which shareholders of companies may bring derivative actions and, in most cases, only the corporation may be the proper claimant or plaintiff for the purposes of maintaining proceedings in respect of any wrongful act committed against it. Neither an individual nor any group of shareholders has any right of action in such circumstances. In addition, Jersey law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a U.S. corporation.

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Item 6. Exhibits.

The exhibits required by Item 601 of Regulation S-K are listed in the Exhibit List below:

EXHIBIT LIST

		Incorporated by Reference
Exhibit	Description	Schedule/ Form	File Number	Exhibit	File Date (mm/dd/yyyy)
3.1	Memorandum and Articles of Association of the Registrant	F-1/A	333-207454	3.2	11/06/2015
10.1#	Mimecast UK 2007 Key Employee Share Option Plan and Form of Share Option Agreement	F-1	333-207454	10.6	10/16/2015
10.2#	Mimecast UK 2010 EMI Share Option Scheme	F-1	333-207454	10.7	10/16/2015
10.3#	Mimecast UK Approved Share Option Plan and Form of Share Option Certificate	F-1	333-207454	10.8	10/16/2015
10.4#	Mimecast Limited 2015 Share Option and Incentive Plan	F-1/A	333-207454	10.9	11/06/2015
10.5#	German Sub-Plan to the Mimecast Limited 2015 Share Option and Incentive Plan	10-K	001-37637	10.6	05/29/2018
10.6#	Form of Agreements under the Mimecast Limited 2015 Share Option and Incentive Plan	10-K	001-37637	10.7	05/29/2018
10.7#	Mimecast Limited 2015 Employee Share Purchase Plan	10-K	001-37637	10.8	05/22/2020
10.8#	German Sub-Plan to the Mimecast Limited 2015 Employee Share Purchase Plan	10-K	001-37637	10.9	05/29/2018
10.9	Lease dated February 17, 2017 by and between Mimecast North America, Inc. and 191 Spring Street Trust	20-F	001-37637	4.11	05/26/2017
10.10	Agreement for Lease dated as of January 2, 2018 by and between Bluebutton Developer Company (2012) Limited, Bluebutton Properties UK Limited, B.L.C.T. (PHC 15A) Limited, Mimecast Services Limited, and the Company, and the related Underleases	10-K	001-37637	10.20	05/29/2018
10.11#	Amended and Restated Employment Agreement dated as of September 2, 2015 between Mimecast North America, Inc. and Peter C. Bauer	10-K	001-37637	10.21	05/29/2018
10.12	Credit Agreement dated as of July 23, 2018, by and among Mimecast Limited, certain of Mimecast Limited’s subsidiaries party thereto, as guarantors, certain financial institutions party thereto from time to time, as Lenders, and JPMorgan Chase Bank, N.A., as administrative agent	8-K	001-37637	10.1	07/24/2018
10.13	Pledge and Security Agreement dated as of July 23, 2018, by and among Mimecast UK Limited, the Grantors (as defined in the Pledge and Security Agreement) and JPMorgan Chase Bank, N.A., as administrative agent to the Lenders party to the Credit Agreement	8-K	001-37637	10.2	07/24/2018

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		Incorporated by Reference
Exhibit	Description	Schedule/ Form	File Number	Exhibit	File Date (mm/dd/yyyy)
10.14	Trademark Security Agreement dated as of July 23, 2018, by and among Ataata, Inc., Mimecast Services Limited, in favor of JPMorgan Chase Bank, N.A., as administrative agent to the Lenders party to the Credit Agreement	8-K	001-37637	10.3	07/24/2018
10.15	Patent Security Agreement dated as of July 23, 2018, by and between Mimecast Services Limited, in favor of JPMorgan Chase Bank, N.A., as administrative agent to the Lenders party to the Credit Agreement	8-K	001-37637	10.4	07/24/2018
10.16	Security Agreement dated as of July 23, 2018 by and between Mimecast UK Limited, Mimecast Services Limited, Mimecast USD Limited, Mimecast Development Limited, as the original chargors, and JPMorgan Chase Bank, N.A., as the collateral agent	8-K	001-37637	10.5	07/24/2018
10.17	Security Interest Agreement dated as of July 23, 2018, between Mimecast Limited and JPMorgan Chase Bank, N.A., as the administrative agent	8-K	001-37637	10.6	07/24/2018
10.18	Security Interest Agreement dated as of July 23, 2018, between Mimecast Offshore Limited and JPMorgan Chase Bank, N.A., as the administrative agent	8-K	001-37637	10.7	07/24/2018
10.19	Security Interest Agreement dated as of July 23, 2018, between Mimecast Services Limited and JPMorgan Chase Bank, N.A., as the administrative agent	8-K	001-37637	10.8	07/24/2018
10.20	Security Interest Agreement dated as of July 23, 2018, between Mimecast UK Limited and JPMorgan Chase Bank, N.A., as the administrative agent	8-K	001-37637	10.9	07/24/2018
10.21#	Israeli Sub-Plan to the Mimecast Limited 2015 Share Option and Incentive Plan	10-Q	001-37637	10.39	11/08/2018
10.22#	Israeli Form of Agreements under the Mimecast Limited 2015 Share Option and Incentive Plan	10-Q	001-37637	10.40	11/08/2018
10.23	First Amendment to Lease dated as of the 8th day of August 2018 by and between 191 Spring Street Trust and Mimecast North America, Inc.	10-Q	001-37637	10.41	11/08/2018
10.24	Deed of Variation dated January 17, 2019 to Agreement for Lease dated as of January 2, 2018 by and between Bluebutton Developer Company (2012) Limited, Bluebutton Properties UK Limited, B.L.C.T. (PHC 15A) Limited, Mimecast Services Limited and Mimecast Limited	10-Q	001-37637	10.43	02/11/2019
10.25#	Offer Letter between Mimecast Limited and Rafe Brown, dated February 7, 2019	8-K	001-37637	10.1	02/11/2019
10.26	Second Amendment to Lease dated as of the 26th day of March 2019 by and between 191 Spring Street Trust and Mimecast North America, Inc	10-K	001-37637	10.40	05/29/2019
10.27	Lease of 3rd Floor of 1 Finsbury Avenue, London EC2 dated 29 March 2019 between B.L.C.T. (PHC 15A) Limited, Mimecast Services Limited and Mimecast Limited	10-K	001-37637	10.41	05/29/2019

58

		Incorporated by Reference
Exhibit	Description	Schedule/ Form	File Number	Exhibit	File Date (mm/dd/yyyy)
10.28	Lease of 4th Floor of 1 Finsbury Avenue, London EC2 dated 29 March 2019 between B.L.C.T. (PHC 15A) Limited, Mimecast Services Limited and Mimecast Limited	10-K	001-37637	10.42	05/29/2019
10.29	Lease of 5th Floor of 1 Finsbury Avenue, London EC2 dated 29 March 2019 between B.L.C.T. (PHC 15A) Limited, Mimecast Services Limited and Mimecast Limited	10-K	001-37637	10.43	05/29/2019
10.30#	Form of Non-Qualified Share Option Agreement for Company Employees Outside the United States under the Mimecast Limited 2015 Share Option and Incentive Plan	10-K	001-37637	10.40	05/22/2020
10.31#	Form of Restricted Share Unit Award Agreement for Company Employees Outside the United States under the Mimecast Limited 2015 Share Option and Incentive Plan	10-K	001-37637	10.41	05/22/2020
10.32#	Mimecast Limited Executive Incentive Plan – FY 2021	10-K	001-37637	10.42	05/22/2020
10.33#	Offer Letter between Mimecast Limited and Dino DiMarino, dated June 23, 2016	10-K	001-37637	10.44	05/22/2020
10.34	Amendment No. 1 to Credit Agreement dated as of June 12, 2020, by and among Mimecast Limited, certain of Mimecast Limited’s subsidiaries party thereto, as guarantors, certain financial institutions party thereto from time to time, as Lenders, and JPMorgan Chase Bank, N.A., as administrative agent	10-Q	001-37637	10.45	08/03/2020
10.35	Form of Director Indemnification Agreement	8-K	001-37637	10.1	10/08/2020
10.36	Form of Officer Indemnification Agreement	8-K	001-37637	10.2	10/08/2020
10.37#	Mimecast Limited Executive Incentive Plan – FY 2022	8-K	001-37637	10.2	05/11/2021
10.38#	Mimecast Limited Executive Severance and Change in Control Plan	10-K	001-37637	10.42	05/27/2021
10.39#*	Mimecast Limited 2015 Employee Share Purchase Plan - Additional Terms and Conditions
10.40#*	Offer Letter between Mimecast North America, Inc, and Shahriar Rafimayeri, dated July 23, 2020
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1@	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2@	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

59

		Incorporated by Reference
Exhibit	Description	Schedule/ Form	File Number	Exhibit	File Date (mm/dd/yyyy)
101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Filed herewith.

^@ Furnished herewith. The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

^# Management contract or compensatory plan or arrangement.

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SIGNATURES

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

	Mimecast Limited
Date: August 3, 2021	By:	/s/ Peter Bauer
		Peter Bauer
		Chairman and Chief Executive Officer (Principal Executive Officer)
Date: August 3, 2021	By:	/s/ Rafeal Brown
		Rafeal Brown
		Chief Financial Officer (Principal Financial and Accounting Officer)

61

EX-10.39

Exhibit 10.39

Mimecast Limited

2015 Employee Share Purchase Plan

Additional Terms and Conditions

1.Terms. By electing to participate in the Mimecast Limited (the “Company”) 2015 Employee Share Purchase Plan (the “Plan”) and completing the online enrollment process required by the Company, Participant hereby agrees to these Additional Terms and Conditions, including any special terms for Participant’s country set forth in the attached appendix (the “Appendix,” and together with these Additional Terms and Conditions, the “Agreement”). Participant understands, acknowledges and agrees that this Agreement, together with the Plan, the terms of which are incorporated herein by reference, govern Participant’s participation in the Plan. Capitalized terms used but not defined herein shall have the same meaning as in the Plan.

2.Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (the “Tax-Related Items”) is and remains Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Plan, including, but not limited to, the grant of the Option, the purchase of ordinary shares of the Company (the “Ordinary Shares”), the sale of Ordinary Shares purchased under the Plan or the receipt of any dividends; and (2) do not commit to and are under no obligation to structure the terms of the Option or any aspect of the Plan to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to the purchase of Ordinary Shares under the Plan, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer, as applicable, to satisfy all obligations for Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligation with regard to all Tax-Related Items by (i) requiring Participant to make a payment in a form acceptable to the Company; (ii) withholding from Participant’s wages or other cash compensation payable to Participant by the Company and/or the Employer; (iii) withholding from proceeds of the sale of Ordinary Shares acquired upon purchase, either through a voluntary sale, or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization without further consent); and/or (iv) any other arrangement approved by the Board and/or the Administrator and to the extent required under applicable law or the Plan.

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering statutory withholding rates or other applicable withholding rates, including maximum rates applicable in Participant’s jurisdiction(s).  In the event of over-withholding, Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Ordinary Shares or, if not refunded, Participant may seek a refund from the local tax authorities. In the event of under-withholding, Participant may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or the Employer.  The Company may refuse to purchase or

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deliver Ordinary Shares or the proceeds from the sale of Ordinary Sharesif Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.

3.Nature of Grant. By participating in the Plan, Participant acknowledges, understands and agrees that:

a)the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

b)the grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;

c)all decisions with respect to future grants, if any, will be at the sole discretion of the Company;

d)the grant of the Option and Participant’s participation in the Plan shall not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer and shall not interfere with the ability of the Company, the Employer or any Subsidiary, as applicable, to terminate Participant’s employment relationship;

e)Participant is voluntarily participating in the Plan;

f)the Option and the Ordinary Shares purchased under the Plan, and the income from and value of same, are not intended to replace any pension rights or compensation;

g)the Option and the Ordinary Shares purchased under the Plan, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;

h)unless otherwise agreed with the Company in writing, the Option and the Ordinary Shares purchased under the Plan, and the income from and value of same, are not granted as consideration for, or in connection with, the services Participant may provide as a director of any parent or Subsidiary of the Company;

i)the future value of the underlying Ordinary Shares is unknown, indeterminable and cannot be predicted with certainty and the value of the Ordinary Shares purchased under the Plan may increase or decrease in the future, even below the Option Price;

j)no claim or entitlement to compensation or damages shall arise from forfeiture of any Option resulting from the termination of Participant’s employment (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any);

k)in the event Participant’s employment is terminated (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), Participant’s Option

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under the Plan, if any, will terminate effective as of Participant’s last day of active employment. The Board and/or the Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of participating in the Plan (including whether Participant is actively employed while on a leave of absence);

l)unless otherwise agreed with the Company, the Option and the Ordinary Shares purchased under the Plan, and the income from and value of same, are not granted as consideration for, or in connection with, the services Participant may provide as a director of any parent or subsidiary of the Company; and

m)neither the Company, the Employer nor any Subsidiary shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the purchase of Ordinary Shares or the subsequent sale of any Ordinary Shares purchased under the Plan.

4.Data Privacy

a)Controller and European Union Representative.  The Company, located at 1 Finsbury Avenue, London, EC2M 2PF United Kingdom, is the controller responsible for the processing of Participant’s personal data in connection with the Plan. The Company’s representative in the European Union is Mimecast Netherlands B.V., Stationsplein, 12-2 1211 EX, Hilversum, The Netherlands.

b)Personal Data Subject to Processing.  The personal data to be processed by the Company in the context of the Plan includes Participant’s name, home address and telephone number, email address, hire date, date of birth, social insurance number or other identification number, tax residency, salary, salary grade, citizenship, nationality, passport number, job title, payroll tax withholding rates and/or deductions as applicable to Participant, any Company shares held by Participant, and details of all Options or any other entitlement to Ordinary Shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, which the Company may receive from Participant or the Subsidiary employing Participant (“Personal Data”).

c)Purposes and Legal Basis of the Processing.  The Company processes the Personal Data for the purposes of allocating Ordinary Shares and implementing, administering and managing Participant’s participation in the Plan.  For those jurisdictions requiring a legal basis for processing such Personal Data, the legal basis for the processing of Personal Data by the Company, including by its Subsidiaries that assist in the administration of the Plan, its third-party service providers, and the Subsidiary employing Participant is Participant’s declaration of consent provided by electronically accepting this Agreement as part of the online enrollment process required by the Company.

d)Share Plan Administration Service Providers and Other Data Recipients.  The Company transfers Personal Data, or parts thereof, to E*TRADE Securities LLC (and its affiliated companies), the brokerage firm engaged by the Company to hold Ordinary Shares and other amounts acquired under the Plan, and to Computershare Limited (and its affiliated companies), the financial institution engaged by the Company to monitor and maintain shareholder records, independent service providers based in the United States (in the case of E*TRADE Securities LLC) and the United States and Jersey, Channel Islands (in the case of Computershare Limited), which assist the Company with the implementation, administration and management of the Plan.  In the future, the Company may select different or additional service providers to assist with the implementation, administration and

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management of the Plan and share Personal Data with such different or additional service providers.  The service provider will open an account for Participant to receive and trade Ordinary Shares acquired under the Plan.  Participant will be asked to agree on separate terms and data processing practices with the service provider, which is a condition to Participant’s ability to participate in the Plan.  In addition, certain of the Company’s operations, including its internal stock plan administration, are based in the United States, which means that it will be necessary to transfer and process Personal Data in, the United States.Participants may, at any time, request a list with the names and addresses of any recipients of the Personal Data by sending the request to the Company’s Data Protection Officer by email at dpo@mimecast.com.

e)International Data Transfers.  The Company is located in the United Kingdom.  Certain of the Company’s Subsidiaries and the Company’s service providers are located in the United States.  Similarly, future service providers might be located in the United States or elsewhere outside of the European Union.  Participant understands and acknowledges that the United States is not, and any other jurisdictions Personal Data might be transferred to and processed in may not be, subject to an unlimited adequacy finding by the European Commission and might apply laws not providing a level of protection of Personal Data equivalent to the level of protection in Participant’s country of residence.

As a result, in the absence of appropriate safeguards such as standard data protection clauses, the processing of Personal Data in the United States or, as the case may be, other jurisdictions outside the European Union might not be subject to substantive data processing principles or supervision by data protection authorities.  In addition, Participant might not have enforceable rights regarding the processing of Personal Data in such jurisdictions.  The transfer of Personal Data is exclusively based on Participant’s consent provided by electronically accepting this Agreement as part of the online enrollment process required by the Company.

f)Data Retention.  The Company, including the Company’s Subsidiary that administers the Plan, and the Subsidiary of the Company that may employ Participant may use Personal Data only as long as is necessary to implement, administer and manage Participant’s participation in the Plan, or to comply with legal or regulatory obligations, including under tax and securities laws.  This period may extend beyond Participant’s period of employment with the Company group.  To the extent that the Company or one of its Subsidiaries uses Personal Data to comply with legal or regulatory obligations, the legal basis, where required, for the processing of Personal Data would be compliance with the relevant laws or regulations or the pursuit of respective legitimate interests not outweighed by Participant’s interests, rights or freedoms.  When the Company, including the Company’s Subsidiary that administers the Plan, or the Subsidiary of the Company that may employ Participant no longer need Personal Data for any of the above purposes, it will cease processing it in this context and remove it from all of its systems used for such purposes, to the fullest extent practicable.

g)Data Subject Rights.  Subject to the conditions set out in the applicable law, Participant may, without limitation, have the right to (i) request access or copies of Personal Data that the Company processes, (ii) rectification of incorrect Personal Data, (iii) deletion of Personal Data, (iv) restrictions on processing of Personal Data, (v) portability of Personal Data, (vi) lodge complaints with competent authorities in Participant’s jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of Personal Data.  To receive clarification regarding these rights or to exercise these rights, Participant can the Company’s Data Protection Officer by email at dpo@mimecast.com.

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h)Voluntariness and Consequences of Denial or Withdrawal of Consent.  Participant’s participation in the Plan and the provision of consent is purely voluntary.  Participant may deny or later withdraw consent at any time, with future effect and for any or no reason.  If Participant does not consent, or if Participant later withdraws consent, Participant’s employment status, salary or service and career with Participant’s employer will not be affected.  The only consequence of denying or withdrawing consent is that the Company will not or will no longer be able to grant Options to Participant or administer or maintain such awards.  Therefore, denial or withdrawal of consent may affect Participant’s ability to realize benefits from the Options and otherwise participate in the Plan.

i)Declaration of Consent.  In order to grant Options and to implement, administer and manage the Plan, the Company needs to collect, use and otherwise process Participant’s Personal Data.  By electronically accepting this Agreement as part of the online enrollment process required by the Company, Participant explicitly declares his or her consent to the data processing operations described above.  This includes, without limitation, the transfer of Participant’s Personal Data to, and the processing of such data by certain of the Company’s subsidiaries, E*TRADE Securities LLC (and its affiliated companies), and Computershare Limited (and its affiliated subsidiaries, or any additional service provider.  Participant may withdraw his or her consent at any time, with future effect and for any or no reason described in Section (h) above.

5.Compliance with Law.  Notwithstanding any other provision of the Plan or this Agreement, unless there is an exemption from any registration, qualification or other legal requirement applicable to the Ordinary Shares, the Company shall not be required to deliver any Ordinary Shares issuable upon exercise of the Option prior to the completion of any registration or qualification of the Ordinary Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable.  Participant understands that the Company is under no obligation to register or qualify the Ordinary Shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Ordinary Shares.  Further, the Company shall have unilateral authority to amend the Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Ordinary Shares.

6.Insider Trading/Market Abuse Restrictions. Participants are at all times subject to the Company’s Insider Trading Policy, as such policy may be amended from time to time at the discretion of the Company. Depending on Participant’s country or his or her broker’s country or where Ordinary Shares are listed, Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect Participant’s ability to accept, acquire, sell or otherwise dispose of Ordinary Shares or rights to Ordinary Shares (e.g., the Option) or rights linked to the value of Ordinary Shares during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Participant further understands that he or she may be prohibited from (i) disclosing inside information to any third party, including fellow employees (other than on a “need to know” basis) and (ii) “tipping” third parties by sharing inside information with them, or otherwise causing third parties to buy or sell Company securities. In addition, local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant placed before possessing the inside information. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant is responsible for ensuring Participant’s compliance with any applicable restrictions and Participant should speak with his or her personal legal advisor on this matter.

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7.Exchange Control, Foreign Asset/Account and/or Tax Requirements. Participant acknowledges that there may be certain exchange control, foreign asset/account and/or tax requirements which may affect Participant’s ability to acquire or hold Ordinary Sharespurchased under the Plan or cash received from participating in the Plan (including from any dividends paid on Ordinary Shares purchased under the Plan) in a brokerage or bank account outside Participant’s country. Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. Participant also may be required to repatriate sale proceeds or other funds received as a result of Participant’s participation in the Plan to his or her country through a designated bank or broker within a certain time after receipt. Finally, Participant may be responsible for paying and/or reporting taxes due with respect to his or her participation in the Plan.  Participant acknowledges that it is Participant’s responsibility to be compliant with such requirements, and Participant should consult his or her personal legal and tax advisors to ensure compliance.

8.Country-Specific Provisions. Notwithstanding any provisions in this Agreement, the Option shall be subject to any special terms and conditions set forth in the attached Appendix for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.  The Appendix constitutes part of this Agreement.

9.Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Option and on any Ordinary Shares purchased under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

10.Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

11.Language. Participant acknowledges that he or she is sufficiently proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow Participant to understand the provisions in this Agreement and the Plan. If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

12.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of Ordinary Shares. Participant understands and agrees that Participant should consult with Participant’s own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

13.Governing Law and Venue. The Option and the provisions of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware USA without regard to that state’s conflicts of laws rules. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of the State of Delaware, or the federal courts for the United States for the District of Delaware, and no other courts, where this grant is made and/or to be performed.

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14.Waiver. Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement or of any subsequent breach by Participant.

15.Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

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Mimecast Limited

2015 Employee Share Purchase Plan

Appendix to the Additional Terms and Conditions

Terms and Conditions

This Appendix includes special terms and conditions applicable in the countries set forth below. These terms and conditions are in addition to or, if so indicated, in place of, the terms and conditions set forth in the Additional Terms and Conditions. If Participant is a citizen or resident of a country other than the one in which Participant is currently residing and/or working, transfers residency and/or employment after Participant enrolls in the Plan, or is considered resident of another country for local law purposes, the Board and/or the Administrator shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to Participant.

Capitalized terms used but not defined herein shall have the same meaning as in the Additional Terms and Conditions and the Plan.

Notifications

This Appendix also includes information regarding securities law, exchange controls and certain other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the countries listed below as of May 2021. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information noted herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time Participant either purchases or sells Ordinary Shares.

In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.

Finally, if Participant is a citizen or resident of a country other than the one in which Participant is currently residing and/or working, transfers residency and/or employment after Participant enrolls in the Plan, or is considered resident of another country for local law purposes, the information contained herein may not be applicable to Participant in the same manner.

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Australia

Terms and Conditions

Securities Law.  

Offer Document

The Company is pleased to provide Participant with this offer to participate in the Plan. This offer document sets out information regarding the offer of Options to purchase ordinary shares of the Company to Australian resident employees of the Company and its Subsidiaries. The Company is providing this information to ensure the Plan’s compliance with Australian Securities and Investments Commission (“ASIC”) Class Order 14/1000 and relevant provisions of the Corporations Act 2001.

Capitalized terms used but not defined herein shall have the same meaning as in the Additional Terms and Conditions and the Plan.

Additional Documents

In addition to the information set out in the Agreement, including this Appendix, Participant is also being provided with copies of the following documents:

(a) the Plan;

(b) the Plan Summary and Prospectus; and

(c) the Employee Information Supplement for Australia, which is set forth in Exhibit A to this offer document (attached at the end of the Appendix)

(collectively, the “Additional Documents”).

The Additional Documents provide further information to help Participant to make an informed investment decision about participating in the Plan.  Neither the Plan nor the Agreement is a prospectus for the purposes of the Australian Corporations Act 2001.

Participant should not rely upon any oral statements made in relation to this offer. Participant should rely only upon the statements contained in the Agreement, including this Appendix, and the Additional Documents when considering participation in the Plan.

General Information Only

The information herein is general information only. It is not advice or information that takes into account Participant’s objectives, financial situation and needs. Participant should consider obtaining his or her own financial product advice from a person who is licensed by ASIC to give such advice.

Risk Factors

Investment in shares involves a degree of risk. Participant should monitor his or her participation and consider all risk factors relevant to the acquisition of Ordinary Shares under the Plan as set forth below and in the Additional Documents.

Participant should have regard to risk factors relevant to investment in securities generally and, in particular, to holding Ordinary Shares. For example, the price at which an individual Ordinary Share is quoted on the

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Nasdaq Global Select Market (“Nasdaq”) may increase or decrease due to a number of factors. There is no guarantee that the price of an OrdinaryShare will increase. Factors that may affect the price of an individual share include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks.

More information about potential factors that could affect the Company’s business and financial results will be included in the Company’s most recent Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q. Copies of these reports are available at http://www.sec.gov/, on the Company’s “Investor Relations” page at https://investors.mimecast.com/, and upon request to the Company.

In addition, the participant should be aware that the Australian dollar (“AUD”) value of any Ordinary Shares acquired under the Plan will be affected by the USD/AUD exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange.

Ordinary Shares in a Jersey, Channel Islands Corporation

Ordinary shares of a Jersey, Channel Islands corporation are analogous to ordinary shares of an Australian corporation. Each holder of an ordinary share of the Company is entitled to one vote. Further, Ordinary Shares are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions.

Ascertaining the Market Price of a Share

The participant may ascertain the current market price of an individual Ordinary Share as traded on the Nasdaq under the symbol “MIME” at:https://www.nasdaq.com/market-activity/stocks/mime. The AUD equivalent of that price can be obtained at: https://www.rba.gov.au/statistics/frequency/exchange-rates.html.

This will not be a prediction of the market price of an individual Ordinary Share when such Ordinary Shares are acquired under the Plan or of the applicable exchange rate on the date of acquisition.

Ascertaining the Option Price of an Ordinary Share

Unless otherwise determined by the Company, the applicable Option Price for an Ordinary Share will be 85% of the lesser of the Fair Market Value (as defined in the Plan) of the Ordinary Shares on (a) the first day of the applicable Offering, and (b) the last trading day of the applicable Offering (i.e., the Exercise Date).

The Option Price is denominated in USD. The AUD equivalent of the Option Price will change with fluctuations in the USD/AUD exchange rate.

By way of example only, if the date of this offer was the first day of the Offering, and assuming that the Fair Market Value of an Ordinary Share on the date of this offer is lower than on the Exercise Date, then the AUD equivalent of the Option Price would be 85% of the closing price of an Ordinary Share on Nasdaq on the date of this offer, divided by the applicable USD/AUD exchange rate.

As noted in above, indicative USD/AUD exchange rates can be obtained at: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.

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Please note that this is only an indicative example of how the AUD equivalent of the Option Price may be calculated based on the assumption that the date of this offer is the relevant date for purposes of this calculation. The actual Option Price of an Ordinary Share under the Plan will depend on the closing price of an OrdinaryShare on Nasdaq on both the first date of the Offering and the last trading day of the Offering--whichever is lower, and the AUD equivalent of the Option Price will depend on the actual exchange rate applied when converting contributions for purposes of purchasing Ordinary Shares on the date of acquisition.

Notifications

Exchange Control Information.  Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers.  The Australian bank assisting with the transaction may file the report for Participant.  If there is no Australian bank involved in the transfer, Participant will have to file the report.  Participant should consult with a personal advisor to ensure that Participant is properly complying with applicable reporting requirements in Australia.

Canada

Terms and Conditions

Nature of Grant.  The following provision replaces Section 3(k) of the Additional Terms and Conditions:

k)in the event Participant’s employment is terminated (for any reason

whatsoever whether or not later found to be invalid, unlawful or in breach of employment laws in the

jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if

any), Participant’s Option under the Plan, if any, will terminate effective as of the earliest of: (i) the

date Participant’s employment with the Company or one of its Subsidiaries is terminated, (ii) the date

that Participant receives notice of termination of Participant’s employment, and (c) Participant’s last

day of active employment, and maybe extended by any period during which notice, pay in lieu

of notice or related payments or damages are provided or mandated under employment laws in the

jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any,

unless the Board and/or the Administrator, in its sole discretion, otherwise determines that such notice

or other pay in lieu of notice will not be included in Participant’s period of service. Unless applicable

employment standards legislation specifically requires, Participant will not earn or be entitled to any

pro-rata purchase for that portion of time before the date on which Participant’s employment is

terminated, nor will Participant be entitled to any compensation for the lost ability to purchase

Ordinary Shares. The Board and/or the Administrator shall have the exclusive discretion to determine

when Participant is no longer actively employed for purposes of participating in the Plan (including whether Participant is actively employed while on a leave of absence);

The following provision applies if Participant resides in Quebec:  

Language Consent.  The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Consentement Relatif à la Langue.  Les parties reconnaissent avoir expressement souhaité que la convention «Agreement » ainsi que tous les documents, avis et procédures judiciaries, éxecutés, donnés ou intentés en vertu de, ou lié, directement ou indirectement à la présente convention, soient rédigés en langue anglaise.

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Notifications

Securities Law Information.  Ordinary Shares acquired under the Plan may not be sold or otherwise disposed of within Canada.  Participant may sell the Ordinary Shares acquired under the Plan only through any third party stock plan service provider selected by the Company either now or in the future, provided the sale of Ordinary Shares takes place outside of Canada through the facilities of a stock exchange on which the Ordinary Shares are traded.  The Ordinary Shares are currently traded on the Nasdaq Global Select Market.

Germany

Notifications

Exchange Control Information.  Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank.  In case of payments in connection with securities (including proceeds realized upon the sale of Ordinary Shares or the receipt of dividends), the report must be made electronically by the 5th day of the month following the month in which the payment was received.  The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English.  Participant is responsible for making this report.

Netherlands

Notifications

South Africa

Notifications

Securities Law Information.  In compliance with South African Securities Law, the documents listed below are available for Participant’s review either on the Company’s public site or in the Participant’s account in www.etrade.com under the “My Account/Company Information” section, as applicable, as listed below:

1. The Company’s most recent Annual Report (Form 10-K): from the investor relations section of the Company’s website at https://investors.mimecast.com/investor-relations/company-overview.

2. The Company’s most recent Plan prospectus: a copy of which can be found in the Participant’s account in www.etrade.com under the “My Account/Company Information” section.

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Participant acknowledges that a copy Company’s most recent Annual Report (Form 10-K)may be sent to Participants, at no charge, on written request by filling out the form available on the Company’s website at https://investors.mimecast.com/investor-resources/information-request.

Fund Remittance Procedures.  Participant understands that to participate in the Plan, Participant may be required to obtain and provide to the Employer, or any third party designated by the Employer or the Company, a Tax Clearance Certificate (with respect to foreign investments) bearing the official stamp and signature of the Exchange Control Department of the South African Revenue Service (“SARS”) (this Tax Clearance Certificate may need to be renewed each twelve (12) months or such other period as may be required by the SARS), and/or (ii) a Transfer of Funds Application (with respect to Foreign Investments), and/or (iii) a power of attorney allowing the Employer to transfer funds and/or submit applicable documentation to the remitting bank on Participant’s behalf.  Participant acknowledges that if Participant does not provide a valid Tax Clearance Certificate, Transfer of Funds Application and/or any requested power of attorney by the deadline provided by the Employer or the Company, the Company may not be able to purchase Ordinary Shares on Participant’s behalf.

Holding of Ordinary Shares.  South African residents are subject to an annual foreign investment allowance. Participant is responsible for ensuring that this limit is not exceeded and should be aware that Participant’s ability to hold Ordinary Shares after purchase may be reduced if the foreign investment limit is utilized to make a transfer of funds offshore that is unrelated to the Plan.

United Kingdom

Terms and Conditions

Securities Law Information.  The Company has prepared and made available an Information Document in reliance on an exemption from prospectus requirements that may otherwise apply to the offer of the Plan in the United Kingdom.  The Information Document is available in the Participant’s account in www.etrade.com under the “My Account/Company Information” section or in hard copy upon request to shares@mimecast.com.

Responsibility for Taxes.  The following provision supplements Section 2 of the Additional Terms and Conditions:

Participant agrees to indemnify the Company and/or the Employer for all Tax-Related Items that they are required to pay or withhold or have paid or will pay to Her Majesty’s Revenue & Customs (“HMRC”) (or any other tax or relevant authority) on Participant’s behalf and authorizes the Company and/or the Employer to recover such amounts by any of the means set out in Section 2 of the Additional Terms and Conditions.  Participant also agrees to be liable for any Tax-Related Items related to the Plan and legally applicable to Participant, and hereby covenants to pay any such Tax-Related items as and when requested by the Company, the Employer or by HMRC (or any other tax or relevant authority).  

Notwithstanding the foregoing, if Participant is an executive officer or director (as within the meaning of Section 13(k) of the U.S. Securities Exchange Act of 1934, as amended), the terms of the immediately foregoing provision will not apply.  In the event that Participant is an executive officer or director and the income tax is not collected from or paid by Participant within ninety (90) days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to Participant on which additional income tax and national insurance contributions may be payable.  Participant acknowledges that Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-

6737452-v2\GESDMS13

assessment regime and for paying the Company or the Employer, as applicable, for the value of any employee national insurance contributions due on this additional benefit.

United Arab Emirates

Notifications

Securities Law Information.  The ordinary shares are available only for employees of the Company and its subsidiaries and are in the nature of providing employee incentives in the United Arab Emirates.  The Agreement, the Plan and other incidental communication materials are intended for distribution only to eligible employees for the purposes of an employee incentive scheme, and must not be delivered to, or relied on, by any other person.

The Dubai Creative Clusters Authority, Emirates Securities and Commodities Authority and/or the Central Bank of the United Arab Emirates have no responsibility for reviewing or verifying any documents in connection with the ordinary shares.  Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Agreement nor taken steps to verify the information set out in it, and have no responsibility for it.

The securities to which this Agreement relate may be illiquid and/or subject to restrictions on their resale.  Individuals should conduct their own due diligence on the securities.

Residents of the United Arab Emirates who do not understand or have questions regarding this Agreement or the Plan should consult an authorized financial adviser.

6737452-v2\GESDMS14

Exhibit A

Employee Information Supplement

for Participants in Australia

Overview

This supplement has been prepared to provide you with a summary of the tax consequences and certain other issues associated with the offering of and your participation in the 2015 Employee Share Purchase Plan (the “Plan”) by Mimecast limited (the “Company”).

This supplement is based on tax laws in effect in your country as of May 2021.

Tax laws often are complex and can change frequently. As a result, you should consult with your personal tax advisor for current information and further guidance regarding your personal tax liabilities and responsibilities associated with your enrollment in the Plan, the purchase of Company ordinary shares, and the sale of Company ordinary shares acquired under the Plan.

Please note that this supplement is general in nature and does not discuss all of the various laws, rules and regulations that may apply. It may not apply to your particular tax or financial situation, and the Company is not in a position to assure you of any particular tax result. You should consult with an appropriate professional advisor as to how the tax or other laws in your country apply to your specific situation.

If you are a citizen or resident of another country or transfer employment and/or residency after you enroll in the Plan or if you are no longer actively employed at the time of the taxable event, the information contained in this supplement may not be applicable to you.

Finally, the information in this supplement assumes that you are not a U.S. tax resident and that you have completed a Form W-8BEN to certify your status as a non-U.S. person.  

tax
Enrollment	Equity awards granted under the Plan are regarded as an Employee Share Scheme (“ESS”) interest. In general, as it is understood that your equity award will be subject to a real risk of forfeiture at the time of grant, your award will not be subject to tax at grant, but when an “ESS deferred taxing point” occurs, as described below.
Purchase	Your ESS deferred taxing point will be on the date(s) shares are purchased on your behalf under the Plan.1 Note that if you sell the underlying shares within 30 days of the original ESS deferred taxing point, the ESS deferred taxing point will shift to the date you sell the shares (the “30-day rule”).
Taxable Amount	The difference between the fair market value of the shares at purchase (the ESS deferred taxing point) and the purchase price (the “discount”).

¹  This supplement assumes the shares are not subject to any genuine restrictions on disposal.

6737452-v2\GESDMS15

tax
	The difference between the fair market value of the shares at purchase (the ESS deferred taxing point) and the purchase price (the “discount”). However, if the 30-day rule applies, the taxable amount will equal the difference between the sale proceeds and the purchase price plus any incidental costs of disposal.
Nature of Taxable Amount	Employment compensation.
Is Income Tax Payable?	Yes.
Are Employee Social Insurance Contributions Payable?	Yes.
Are Other Taxes Payable?	No.

company/employer tax withholding and reporting
Withholding
Is Income Tax Withheld?	No, assuming you provided your tax file number to your employer. You personally will be responsible for paying the applicable taxes directly to the Australian Tax Office (“ATO”).
Are Employee Social Insurance Contributions Withheld?	No, assuming you provided your tax file number to your employer. You personally will be responsible for paying the applicable taxes directly to the ATO.
Are Other Taxes Withheld?	Not applicable.
Reporting
Does the Taxable Amount Need to be Reported?	The Company will provide you (no later than July 14 after the relevant tax year ending June 30) and the Commissioner of Taxation (no later than August 14 after the end of the tax year) with a statement containing certain information about your award for the income tax year when the ESS deferred taxing point occurs (typically, the tax year in which you purchase Company ordinary shares), including an estimate of the market value of the shares less the purchase price. Note that if you sell the ordinary shares within 30 days of the original ESS deferred taxing point, as described above, the taxable amount will not be based on the market value of the shares on the date of purchase less the purchase price (as reported by your employer), but on the sale proceeds less the purchase price plus any incidental costs of disposal. Thus, it will be your responsibility to calculate the taxable amount at sale in order to remit applicable taxes due.

6737452-v2\GESDMS16

SALE OF SHARES
Taxation in Your Country	When you subsequently sell Company ordinary shares acquired under the Plan, you may be subject to additional taxation on any gain you realize, unless you dispose of the shares within 30 days after the original ESS deferred taxing point (in which case your tax treatment will be limited to the tax consequences described above). If you dispose of the shares more than 30 days after the original ESS deferred taxing point, you will be subject to capital gains tax to the extent that the sale proceeds (or market value if you do not dispose of the ordinary shares in an arm’s length transaction2) exceed your cost basis in the ordinary shares. Your cost basis in the shares will generally be equal to the market value of the ordinary shares at the ESS deferred taxing point (which will usually be the purchase date) plus any incidental costs of disposal. The amount of any capital gain you realize must be included in your assessable income for the year in which the ordinary shares are sold. However, if you hold the ordinary shares for at least one (1) year prior to selling (excluding the dates you acquired and sold the ordinary shares), you may discount the capital gain to be included in your assessable income by fifty-percent (50%). If the sale proceeds (or market value if you do not dispose of the ordinary shares in an arm’s length transaction) are lower than your cost basis in the ordinary shares sold, you will realize a capital loss. Capital losses may be used to offset capital gains realized in the current tax year or in any subsequent tax year, but may not be used to offset other types of income (e.g., salary or wage income). You will be responsible for reporting any capital gains (losses) you recognize from the sale of ordinary shares and paying any applicable taxes due on such gains. The calculation of capital gains (losses) at the time of sale is complex and you should consult with your personal tax advisor.
Taxation in the U.S.	Assuming you are not a U.S. tax resident and have provided the Company and/or the broker with a Form W-8BEN to certify your status as a non-U.S. person, you will not be subject to tax in the U.S. on any gain you realize when ordinary shares acquired under the Plan are sold. If you have not provided a Form W-8BEN, the broker will perform U.S. back-up withholding on the gain at a rate of 24%.

²  If you sell your shares on a recognized stock exchange, this will generally be considered an arm’s length transaction.

6737452-v2\GESDMS17

ADDITIONAL DETAILS ON YOUR tax REPORTING OBLIGATIONS
Purchase	You will receive an ESS Statement by July 14 after the end of the tax year (ending June 30) in which the ESS deferred taxing point happens. The Company will also lodge an ESS Annual Report with the ATO by August 14 of that year.   The assessable amount should be included in Box F of the ESS Statement. Once the Company lodges the ESS Annual Report, the amount shown in Box F of your ESS Statement may be pre-filled into Box F of item 12 of your Tax Return for Individuals. You should ensure that the amount included in Box F of Item 12 of your tax return is correct based on your personal circumstances.   Your tax return is generally due by October 31. However, if you appoint a tax agent prior to that date, you may be entitled to an extension in line with the tax agent's lodgment program.
Sale of Ordinary Shares	You should include the correct amount of any capital gains in item 18 of your tax return. Your tax return is generally due by October 31. However, if you appoint a tax agent prior to that date, you may be entitled to an extension in line with the tax agent's lodgment program.

6737452-v2\GESDMS18

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter Bauer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mimecast Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2021	By:	/s/ Peter Bauer
		Peter Bauer
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rafeal Brown, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mimecast Limited;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2021	By:	/s/ Rafeal Brown
		Rafeal Brown
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Mimecast Limited (the “Company”) for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter Bauer, Chief Executive Officer of the Company, certify to the best of my knowledge on the date hereof, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2021	By:	/s/ Peter Bauer
		Peter Bauer
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Mimecast Limited (the “Company”) for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rafeal Brown, Chief Financial Officer of the Company, certify to the best of my knowledge on the date hereof, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2021	By:	/s/ Rafeal Brown
		Rafeal Brown
		Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Jun. 30, 2021	Jul. 28, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Trading Symbol	MIME
Title of 12(b) Security	Ordinary Shares, par value $0.012 per share
Security Exchange Name	NASDAQ
Entity Registrant Name	MIMECAST LIMITED
Entity Central Index Key	0001644675
Current Fiscal Year End Date	--03-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		65,738,818
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity File Number	001-37637
Entity Incorporation, State or Country Code	Y9
Entity Tax Identification Number	00-0000000
Entity Address, Address Line One	1 Finsbury Avenue
Entity Address, City or Town	London
Entity Address, Country	GB
Entity Address, Postal Zip Code	EC2M 2PF
City Area Code	781
Local Phone Number	996-5340

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Current assets
Cash and cash equivalents	$ 338,433	$ 292,949
Accounts receivable, net	101,217	114,280
Deferred contract costs, net	16,952	16,165
Prepaid expenses and other current assets	21,778	20,031
Total current assets	478,380	443,425
Property and equipment, net	92,858	92,891
Operating lease right-of-use assets	122,739	128,063
Intangible assets, net	41,447	43,193
Goodwill	176,908	173,952
Deferred contract costs, net of current portion	50,853	50,086
Other assets	2,601	3,097
Total assets	965,786	934,707
Current liabilities
Accounts payable	12,576	10,487
Accrued expenses and other current liabilities	48,843	54,676
Deferred revenue	232,645	237,749
Current portion of finance lease obligations	50	323
Current portion of operating lease liabilities	33,237	33,447
Current portion of long-term debt	9,722	9,090
Total current liabilities	337,073	345,772
Deferred revenue, net of current portion	12,595	12,936
Operating lease liabilities	107,669	112,316
Long-term debt	92,238	94,671
Other non-current liabilities	7,527	8,143
Total liabilities	557,102	573,838
Commitments and contingencies (Note 13)
Shareholders' equity
Ordinary shares, $0.012 par value, 300,000,000 shares authorized; 65,661,585 and 64,562,222 shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively	788	775
Additional paid-in capital	440,801	408,249
Accumulated deficit	(43,843)	(53,915)
Accumulated other comprehensive income	10,938	5,760
Total shareholders' equity	408,684	360,869
Total liabilities and shareholders' equity	$ 965,786	$ 934,707

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2021	Mar. 31, 2021
Statement Of Financial Position [Abstract]
Ordinary shares, par value	$ 0.012	$ 0.012
Ordinary shares, authorized	300,000,000	300,000,000
Ordinary shares, issued	65,661,585	64,562,222
Ordinary shares, outstanding	65,661,585	64,562,222

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenue	$ 142,549	$ 115,176
Cost of revenue	33,549	28,469
Gross profit	109,000	86,707
Operating expenses
Research and development	31,486	22,802
Sales and marketing	48,262	44,043
General and administrative	17,923	17,168
Total operating expenses	97,671	84,013
Income from operations	11,329	2,694
Other income (expense)
Interest income	158	177
Interest expense	(536)	(883)
Foreign exchange (expense) income and other, net	(514)	1,763
Total other income (expense), net	(892)	1,057
Income before income taxes	10,437	3,751
Provision for income taxes	365	613
Net income	$ 10,072	$ 3,138
Net income per ordinary share
Basic	$ 0.15	$ 0.05
Diluted	$ 0.15	$ 0.05
Weighted-average number of ordinary shares outstanding
Basic	65,198	63,019
Diluted	66,934	64,676

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 10,072	$ 3,138
Other comprehensive income:
Change in foreign currency translation adjustment	5,178	3,900
Total other comprehensive income	5,178	3,900
Comprehensive income	$ 15,250	$ 7,038

XML

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Ordinary Shares [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning balance at Mar. 31, 2020	$ 232,055	$ 754	$ 325,808	$ (83,660)	$ (10,847)
Beginning balance, Shares at Mar. 31, 2020		62,792,000
Net income	3,138			3,138
Foreign currency translation adjustment	3,900				3,900
Issuance of ordinary shares upon exercise of share options	5,040	$ 3	5,037
Issuance of ordinary shares upon exercise of share options, Shares		249,000
Share-based compensation	13,666		13,666
ESPP purchase	3,095	$ 1	3,094
ESPP purchase, Shares		87,000
Tax withholding on ESPP purchases and vesting of RSUs	(2,575)	$ (1)	(2,574)
Tax withholding on ESPP purchases and vesting of RSUs, Shares		(76,000)
Vesting of RSUs		$ 2	(2)
Vesting of RSUs, Shares		217,000
Ending balance at Jun. 30, 2020	258,319	$ 759	345,029	(80,522)	(6,947)
Ending balance, Shares at Jun. 30, 2020		63,269,000
Beginning balance at Mar. 31, 2021	$ 360,869	$ 775	408,249	(53,915)	5,760
Beginning balance, Shares at Mar. 31, 2021	64,562,222	64,562,000
Net income	$ 10,072			10,072
Foreign currency translation adjustment	5,178				5,178
Issuance of ordinary shares upon exercise of share options	$ 18,967	$ 8	18,959
Issuance of ordinary shares upon exercise of share options, Shares	672,024	672,000
Share-based compensation	$ 17,396		17,396
ESPP purchase	3,374	$ 1	3,373
ESPP purchase, Shares		75,000
Tax withholding on ESPP purchases and vesting of RSUs	(7,172)	$ (2)	(7,170)
Tax withholding on ESPP purchases and vesting of RSUs, Shares		(174,000)
Vesting of RSUs		$ 6	(6)
Vesting of RSUs, Shares		527,000
Ending balance at Jun. 30, 2021	$ 408,684	$ 788	$ 440,801	$ (43,843)	$ 10,938
Ending balance, Shares at Jun. 30, 2021	65,661,585	65,662,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating activities
Net income	$ 10,072	$ 3,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,876	8,852
Share-based compensation expense	17,388	13,653
Amortization of deferred contract costs	4,161	2,869
Amortization of debt issuance costs	111	114
Amortization of operating lease right-of-use assets	8,330	7,111
Deferred income tax expense (benefit)	117	(178)
Unrealized currency losses (gains) on foreign denominated transactions	83	(2,733)
Changes in assets and liabilities:
Accounts receivable	13,935	12,405
Prepaid expenses and other current assets	(1,218)	(497)
Deferred contract costs	(5,403)	(5,203)
Other assets	405	217
Accounts payable	4,368	(2,037)
Deferred revenue	(6,599)	(5,645)
Operating lease liabilities	(8,045)	(8,221)
Accrued expenses and other liabilities	(6,881)	5,460
Net cash provided by operating activities	40,700	29,305
Investing activities
Purchases of property, equipment and capitalized software	(9,095)	(10,771)
Net cash used in investing activities	(9,095)	(10,771)
Financing activities
Proceeds from issuance of ordinary shares	21,926	8,135
Withholding taxes related to net share settlement of ESPP purchases and vesting of RSUs	(7,172)	(2,575)
Payments on debt	(1,875)	(1,250)
Payments on finance lease obligations	(273)	(347)
Net cash provided by financing activities	12,606	3,963
Effect of foreign exchange rates on cash	1,273	2,086
Net increase in cash and cash equivalents	45,484	24,583
Cash and cash equivalents at beginning of period	292,949	173,958
Cash and cash equivalents at end of period	338,433	198,541
Supplemental disclosure of cash flow information
Cash paid during the period for interest	426	763
Cash paid during the period for income taxes	225	82
Supplemental disclosure of non-cash investing and financing activities
Unpaid purchases of property, equipment and capitalized software	4,279	8,731
Operating lease right-of-use assets exchanged for lease obligations	2,000	$ 1,004
Proceeds receivable from issuance of ordinary shares	$ 415

XML

Summary of Business and Significant Accounting Policies

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Business and Significant Accounting Policies

1. Summary of Business and Significant Accounting Policies

Description of Business

Mimecast Limited (Mimecast or the Company) is a public limited company organized under the laws of the Bailiwick of Jersey on July 28, 2015 and is headquartered in London, England.

The principal activity of the Company is the provision of cloud security and risk management services for email and corporate information. The Company’s Email Security 3.0 and Cyber Resilience Extension offerings are designed to protect customers from today’s rapidly changing security environment. The Email Security 3.0 strategy addresses threats in three distinct zones: at the email perimeter (Zone 1); inside the network and the organization (Zone 2); and beyond the perimeter (Zone 3). The Company’s Cyber Resilience Extensions expand resilience to other critical elements of an organization’s digital infrastructure. The Company’s primary offerings include: email security; email continuity and sync & recover; email archiving; awareness training; web security; DMARC analyzer; CyberGraph; brand exploit protection; and threat intelligence and our API ecosystem. Mimecast operates principally in Europe, North America, Africa and Australia.

The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customer concentration, security risks, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals.

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These financial statements and notes should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2021 and related notes, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 27, 2021.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended March 31, 2021 contained in the Company’s Annual Report on Form 10-K and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and for the three months ended June 30, 2021 and 2020. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

The Company reclassified certain amounts within its condensed consolidated statement of cash flows to conform to current period presentation. The reclassifications include $0.1 million from other assets and $0.1 million from accrued expenses and other liabilities to deferred income tax benefit for the three months ended June 30, 2020. These reclassifications had no impact on the Company’s previously reported results of operations or balance sheets.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period.

Significant estimates relied upon in preparing these condensed consolidated financial statements include revenue recognition, variable consideration, valuation at fair value of assets acquired or sold, including intangible assets, goodwill, tangible assets, and liabilities assumed, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets, contingent liabilities, determination of incremental borrowing rates, restructuring liabilities, expensing and capitalization of research and development costs for internal-use software, the determination of the fair value of share-based awards issued, the average period of benefit associated with costs capitalized to obtain revenue contracts and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Due to the global COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of June 30, 2021. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recorded in the period in which they become known.

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive income consists of net income and other comprehensive income, which includes certain changes in equity that are excluded from net income. As of June 30, 2021 and March 31, 2021, accumulated other comprehensive income is presented separately on the condensed consolidated balance sheets and consists of cumulative foreign currency translation adjustments.

Accounting Policies

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the condensed consolidated financial statements. As of June 30, 2021, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K, have not changed.

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Revenue and Deferred Revenue

3 Months Ended

Jun. 30, 2021

Revenue From Contract With Customer [Abstract]

Revenue and Deferred Revenue

2. Revenue and Deferred Revenue

Revenue recognized during the three months ended June 30, 2021 and 2020 from amounts included in deferred revenue at the beginning of the respective periods was approximately $99.9 million and $80.8 million, respectively. Revenue recognized during the three months ended June 30, 2021 and 2020 from performance obligations satisfied or partially satisfied in previous periods was not material.

Contracted revenue as of June 30, 2021 and March 31, 2021

that has not yet been recognized (contracted and not recognized) was $116.6 million and $117.5 million, respectively, which includes deferred revenue and non-cancellable amounts that will be invoiced and recognized as revenue in future periods and excludes contracts with an original expected length of one year or less. The Company expects 53% of contracted and not recognized revenue to be recognized over the next year, 46% in years two and three, with the remaining balance recognized thereafter.

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Concentration of Credit Risk and Off-Balance Sheet Risk

3 Months Ended

Jun. 30, 2021

Risks And Uncertainties [Abstract]

Concentration of Credit Risk and Off-Balance Sheet Risk

3. Concentration of Credit Risk and Off-Balance Sheet Risk

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash, cash equivalents and investments with major financial institutions of high-credit quality. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits.

Credit risk with respect to accounts receivable is dispersed due to the Company’s large number of customers. The Company’s accounts receivable are derived from revenue earned from customers primarily located in the United States, the United Kingdom, and South Africa. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. The Company estimates credit losses at the reporting date resulting from the inability of its customers to make required payments, including its historical experience of actual losses and the aging of such receivables. These receivables have been pooled by shared risk characteristics. Based on known information the Company may also establish specific allowances for customers in an adverse financial condition or adjust its expectations of changes in conditions that may impact the collectability of outstanding receivables. Credit losses historically have not been significant and the Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. The Company will continue to actively monitor the impact of the global COVID-19 pandemic on expected credit losses. As of June 30, 2021 and March 31, 2021, no individual customer represented more than 10% of the Company’s accounts receivable. During the three months ended June 30, 2021 and 2020, no individual customer represented more than 10% of the Company’s revenue.

When investments are held the Company diversifies its investment portfolio by investing in multiple types of investment-grade securities and attempts to mitigate the risk of loss by using a third-party investment manager. As of June 30, 2021 and March 31, 2021, the Company did not hold any investments.

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Cash, Cash Equivalents and Investments

3 Months Ended

Jun. 30, 2021

Cash And Cash Equivalents [Abstract]

Cash, Cash Equivalents and Investments

4. Cash, Cash Equivalents and Investments

The Company considers all highly liquid instruments purchased with an original maturity date of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks, amounts held in interest-bearing money market funds and investments with maturities of 90 days or less from the date of purchase. Cash equivalents are carried at cost, which approximates their fair market value. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their stated maturities as well as the time period the Company intends to hold such securities. The Company determines the appropriate classification of investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company adjusts the cost of investments for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income in the condensed consolidated statements of operations. As of June 30, 2021 and March 31, 2021, cash and cash equivalents of $338.4 million and $292.9 million, respectively, were carried at amortized cost, which approximates their market value.

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Fair Value of Financial Instruments

3 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

5. Fair Value of Financial Instruments

The Company’s financial instruments include cash, cash equivalents, investments, accounts receivable, accounts payable, accrued expenses and borrowings under the Company’s long-term debt arrangements. The carrying amount of the Company’s long-term debt arrangements approximates its fair values due to the interest rates the Company believes it could obtain for arrangements with similar terms. The carrying amount of the remainder of the Company’s financial instruments approximated their fair values as of June 30, 2021 and March 31, 2021, due to the short-term nature of those instruments.

The Company has evaluated the estimated fair value of financial instruments using available market information. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.

Fair values determined using “Level 1 inputs” utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  Fair values determined using “Level 2 inputs” utilize quoted prices that are directly or indirectly observable. Fair values determined using “Level 3 inputs” utilize unobservable inputs for determining fair values of assets or liabilities that reflect an entity's own assumptions in pricing assets or liabilities. As of June 30, 2021 and March 31, 2021, the Company did not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities and did not elect the fair value option for any financial assets and liabilities transacted in the three months ended June 30, 2021 and the year ended March 31, 2021.

The following table summarizes financial assets measured and recorded at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of June 30, 2021 and March 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	June 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,808

	March 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,366

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Leases

3 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

6. Leases

The Company has operating leases for data centers and facilities and finance leases for certain equipment. The leases have remaining lease terms of less than one year to 8 years, some of which include options to extend the leases for up to 10 years. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. Variable costs, which are based on actual usage, are not included in the measurement of right-of-use assets (ROUA) and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs. Amortization expense of the ROUA for finance leases is recognized on a straight-line basis over the lease term and interest expense for finance leases is recognized based on the effective interest method using an incremental borrowing rate.

The components of lease expense were as follows:

	Three months ended June 30,
	2021		2020
Short-term lease cost	$	26	$	67
Variable lease cost		1,411		1,743
Operating lease cost		9,946		8,377
Finance lease cost:
Amortization of lease assets		250		250
Interest on lease liabilities		3		16
Total finance lease cost	$	253	$	266

Supplemental cash flow information related to leases was as follows:

	Three months ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	9,672	$	9,637
Operating cash outflows from finance leases	$	3	$	20
Financing cash outflows from finance leases	$	273	$	347

Weighted-average remaining lease term and discount rate:

	As of June 30,			As of March 31,
	2021			2021
Weighted-average remaining lease term (in years)
Operating leases		5.58			5.76
Finance leases		0.39			0.35
Weighted-average discount rate
Operating leases		4.57	%		4.58	%
Finance leases		4.83	%		4.83	%

Maturities of lease liabilities as of June 30, 2021 were as follows:

Year Ending March 31,	Operating Leases			Finance Leases
Remainder of 2022	$	30,453		$	51
2023		32,842			—
2024		24,023			—
2025		22,095			—
2026		17,558			—
Thereafter		32,515			—
Total lease payments		159,486			51
Less: imputed interest		(18,580	)		(1	)
Total lease liabilities	$	140,906		$	50

As of June 30, 2021, the Company had additional leases with future lease payments of $8.9 million, the terms of which have not yet commenced. These leases are expected to commence in the current fiscal year with lease terms of approximately five years.

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Internal-use Software Costs

3 Months Ended

Jun. 30, 2021

Research And Development [Abstract]

Internal-use Software Costs

7. Internal-use Software Costs

Software Development Costs

Costs incurred to develop software applications used in the Company’s SaaS platform consist of certain direct costs of materials and services incurred in developing or obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. Qualified costs incurred during the operating stage of the Company’s software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs incurred for maintenance of, and minor upgrades and enhancements to, internal-use software are expensed as incurred. During the three months ended June 30, 2021 and 2020, the Company believes the substantial majority of its development efforts were either in the preliminary project stage of development or in the operation stage (post-implementation), and accordingly, no costs have been capitalized during these periods. These costs are included in the accompanying condensed consolidated statements of operations as research and development expense.

Implementation Costs on Cloud-computing Arrangements

As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized implementation costs related to hosting arrangements that were incurred during the application development stage were $2.7 million and $2.9 million, respectively. These capitalized implementation costs will be amortized over the expected term of the arrangement and are amortized in the same line item in the condensed consolidated statements of operations as the expense for fees for the associated hosting arrangement.

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Net Income Per Ordinary Share

3 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Net Income Per Ordinary Share

8. Net Income Per Ordinary Share

The Company calculates basic and diluted net income per ordinary share by dividing net income by the weighted-average number of ordinary shares outstanding during the period.

The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except per share data):

	Three months ended June 30,
	2021		2020
Numerator:
Net income	$	10,072	$	3,138
Denominator:
Weighted-average number of ordinary shares used in    computing net income per share applicable    to ordinary shareholders – basic		65,198		63,019
Dilutive effect of share equivalents resulting from    share options, RSUs and ESPP shares		1,736		1,657
Weighted-average number of ordinary shares used in    computing net income per share – diluted		66,934		64,676
Net income per share applicable to ordinary    shareholders:
Basic	$	0.15	$	0.05
Diluted	$	0.15	$	0.05

The following potentially dilutive ordinary share equivalents have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive for the periods presented (in thousands):

	Three months ended June 30,
	2021		2020
Share options outstanding		2,554		4,406
Unvested RSUs		131		520
ESPP shares		72		85

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Share-Based Compensation

3 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

9. Share-Based Compensation

For the three months ended June 30, 2021 and 2020, all grants of share-based awards have been made under the Mimecast Limited 2015 Share Option and Incentive Plan (the 2015 Plan) and the 2015 Employee Share Purchase Plan (the ESPP). Additionally, the Company has two pre-IPO share-based compensation plans including the Mimecast Limited 2010 EMI Share Option Scheme (the 2010 Plan), and the Mimecast Limited Approved Share Option Plan (the Approved Plan) (the 2010 Plan and the Approved Plan, collectively, the Historical Plans). Subsequent to November 19, 2015, the IPO date, no further grants under the Historical Plans were permitted.

The 2015 Plan allows the compensation committee of the board of directors to make equity-based incentive awards to the Company’s officers, employees, non-employee directors and consultants. Initially a total of 5.5 million ordinary shares were reserved for the issuance of awards under the 2015 Plan. This number is subject to adjustment in the event of a share split, share dividend or other change in our capitalization. The 2015 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1st by 5% of the outstanding number of ordinary shares on the immediately preceding December 31 or such lesser number of shares as determined by the board of directors.

Under the 2015 Plan, the share option price may not be less than the fair market value of the ordinary shares on the date of grant and the term of each share option may not exceed 10 years from the date of grant. Share options typically vest over 4 years, but vesting provisions can vary based on the discretion of the board of directors. The Company settles share option exercises and RSU releases under the 2015 Plan through newly issued shares. The Company’s ordinary shares underlying any awards that are forfeited, canceled, withheld upon exercise of an option, or settlement of an award to cover the exercise price or tax withholding, or otherwise terminated other than by exercise will be added back to the shares available for issuance under the 2015 Plan.

Initially, a total of 1.1 million shares of the Company's ordinary shares were reserved for future issuance under the ESPP. This number is subject to change in the event of a share split, share dividend or other change in capitalization. The ESPP may be terminated or amended by the board of directors at any time.

The ESPP permits eligible employees to purchase shares by authorizing payroll deductions from 1% to 10% of his or her eligible compensation during each six-month offering period, which starts on the first business day in January and July each year. Unless an employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares on the last day of the offering period at a price equal to 85% of the fair market value of the shares on the first business day or last business day of the offering period, whichever is lower.

Share Options

The fair value of each share option issued under the 2015 Plan was estimated using the Black-Scholes option-pricing model that used the following weighted-average assumptions:

	Three months ended June 30,
	2021			2020
Expected term (in years)		6.1			6.1
Risk-free interest rate		1.4	%		0.6	%
Expected volatility		46.7	%		44.6	%
Expected dividend yield		—	%		—	%
Grant date fair value per ordinary share	$	41.55		$	33.43

The weighted-average per share fair value of options granted to employees during the three months ended June 30, 2021 and 2020 was $19.10 and $14.31, respectively. As of June 30, 2021, the number of options and awards available for future grant under the 2015 Plan was 9,600,728.

Share option activity under the 2015 Plan and the Historical Plans for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of March 31, 2021		5,322,599		$	34.13		6.81	$	43,683
Options granted		718,423		$	41.55
Options exercised		(672,024	)	$	28.23
Options forfeited and cancelled		(228,711	)	$	39.98
Outstanding as of June 30, 2021		5,140,287		$	35.68		7.33	$	89,286
Exercisable as of June 30, 2021		2,620,341		$	30.72		6.33	$	58,510

For the three months ended June 30, 2021 and 2020, the total intrinsic value of options exercised was $13.7 million and $5.4 million, respectively. For the three months ended June 30, 2021 and 2020, total cash proceeds from option exercises was $18.6 million and $5.0 million, respectively.

As of June 30, 2021, there was approximately $40.0 million of unrecognized share-based compensation related to unvested share options, which is expected to be recognized over a weighted-average period of 2.58 years.

RSUs

The Company grants RSUs to its non-employee directors and its employees. Non-employee directors receive an initial RSU grant upon joining the board of directors that vests over three years and an annual grant each year thereafter that vests fully on the one-year anniversary of the grant date. RSUs granted to employees generally vest in four equal annual installments.

RSU activity under the 2015 Plan for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Grant Date Fair Value		Intrinsic Value (in thousands)
Unvested RSUs as of March 31, 2021		2,630,359		$	38.62	$	105,767
RSUs granted		1,609,373		$	41.17
RSUs vested		(526,561	)	$	37.10
RSUs forfeited		(325,680	)	$	38.99
Unvested RSUs as of June 30, 2021		3,387,491		$	40.03	$	179,706

As of June 30, 2021, there was approximately $121.0 million of unrecognized share-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 3.19 years.

ESPP

In the three months ended June 30, 2021 and 2020, the Company recognized $0.5 million and $0.5 million of share-based compensation expense under the ESPP, respectively. In the three months ended June 30, 2021 and 2020, total cash proceeds from shares purchased under the ESPP were $3.4 million and $3.1 million, respectively.

As of June 30, 2021, there were 0.5 million shares of the Company's ordinary shares available for future issuance under the ESPP.

Share-based compensation expense recognized under the 2015 Plan, Historical Plans and ESPP in the accompanying condensed consolidated statements of operations was as follows:

	Three months ended June 30,
	2021		2020
Cost of revenue	$	1,507	$	1,125
Research and development		6,462		3,884
Sales and marketing		5,084		4,437
General and administrative		4,335		4,207
Total share-based compensation expense	$	17,388	$	13,653

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Acquisitions

3 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Acquisitions

10. Acquisitions

The following acquisition has been accounted for as a business combination in accordance with ASC 805, Business Combinations. The Company has recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition dates.

Fiscal 2021 Acquisition

eTorch Inc.

On July 29, 2020, the Company acquired eTorch Inc. (MessageControl), a company incorporated under the laws of the State of Delaware, for cash consideration of approximately $17.0 million, net of cash acquired of $0.4 million. MessageControl is a messaging security provider with solutions designed to help stop social engineering and human identity attacks with the use of machine learning technology.

The purchase price allocation primarily consisted of $3.8 million of identifiable intangible assets and approximately $14.1 million of goodwill that is not deductible for tax purposes. The identifiable intangible assets primarily include developed technology of $3.5 million, customer relationships of $0.2 million, and patent licenses of $0.1 million, with estimated useful lives of 9.7 years, 6.7 years, and 5.0 years respectively. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce.

The Company has not presented pro forma results of operations for the MessageControl acquisition because it is not material to the Company's condensed consolidated results of operations, financial position, or cash flows.

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Goodwill and Intangible Assets

3 Months Ended

Jun. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

11. Goodwill and Intangible Assets

The following is a rollforward of the Company’s goodwill balance:

	Three months ended June 30,
	2021
Beginning balance	$	173,952
Effect of foreign exchange rates		2,956
Ending balance	$	176,908

Purchased intangible assets consisted of the following: 

	Weighted-
	Average		June 30, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,887	$	(10,387	)	$	29,500
Customer relationships		4		997		(362	)		635
Capitalized software and other (1) (2)		3		25,414		(14,102	)		11,312
			$	66,298	$	(24,851	)	$	41,447

	Weighted-
	Average		March 31, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,180	$	(9,114	)	$	30,066
Customer relationships		4		984		(318	)		666
Capitalized software and other (1) (2)		3		25,161		(12,700	)		12,461
			$	65,325	$	(22,132	)	$	43,193

(1) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $2.0 million and $2.1 million, respectively, of costs capitalized related to video production costs.

(2) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $0.3 million and $0.3 million of costs capitalized related to IP addresses.

For the three months ended June 30, 2021 and 2020, the Company recorded amortization expense of $2.4 million and $2.1 million, respectively. Amortization relating to developed technology and capitalized software was recorded within cost of revenue and amortization of customer relationships was recorded within sales and marketing expenses.  

Future estimated amortization expense of intangible assets as of June 30, 2021, is as follows:

	Purchased Intangible Assets		Capitalized Software
Remainder of 2022	$	3,430	$	3,778
2023		4,573		3,876
2024		4,511		2,101
2025		4,433		1,130
2026		4,355		358
Thereafter		8,833		69
Total	$	30,135	$	11,312

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Debt

3 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Debt

12. Debt

In July 2018, the Company entered into a credit agreement (the Credit Agreement) that provided the Company with a $100.0 million senior secured term loan (the Term Loan) and a $50.0 million senior secured revolving credit facility (the Revolving Facility). In June 2020, the Credit Agreement was amended to permit the Company to issue letters of credit in certain additional foreign currencies beyond the U.S. dollar and the British pound (as amended, the Credit Agreement, the Term Loan and the Revolving Facility are referred to herein as the Credit Facility). The term of the Credit Facility is five years, maturing on July 23, 2023. As of June 30, 2021 and March 31, 2021, the effective interest rate under the Credit Facility was LIBOR plus 1.375%.

The Credit Facility requires the Company to maintain compliance with certain debt covenants, all of which the Company was in compliance with as of June 30, 2021.

As of June 30, 2021 and March 31, 2021, the Company had $85.0 million and $86.9 million, respectively, outstanding on the Term Loan and had $17.5 million outstanding borrowings under the Revolving Facility. As of June 30, 2021 and March 31, 2021, total availability under the Revolving Facility was reduced by outstanding letters of credit of $2.2 million. As of June 30, 2021 and March 31, 2021, total availability under the Revolving Facility was $30.3 million. Future minimum principal payment obligations under the Term Loan and Revolving Facility are as follows:

Fiscal Year Ending March 31,	Debt
Remainder of 2022	$	7,500
2023		10,000
2024		85,000
Total minimum debt payments		102,500
Less: Debt issuance costs		(540	)
Less: Current portion of long-term debt		(9,722	)
Long-term debt	$	92,238

As of June 30, 2021 and March 31, 2021, the balance of debt issuance costs recorded as a reduction of debt was $0.5 million and $0.6 million, respectively. As of June 30, 2021 and March 31, 2021, the balance of debt issuance costs recorded in other assets was $0.3 million. For the three months ended June 30, 2021 and 2020, total interest expense under the Credit Facility was $0.4 million and $0.7 million, respectively.

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Commitments and Contingencies

3 Months Ended

Jun. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

Litigation

On September 10, 2019, ZapFraud, Inc. (ZapFraud), filed a complaint in the U.S. District Court for the District of Delaware against the Company’s wholly owned subsidiaries, Mimecast North America, Inc., Mimecast Services Limited and Mimecast UK Limited. The complaint alleges that certain elements of the Company’s email security technology infringe a patent held by ZapFraud.  ZapFraud seeks an award for damages in an unspecified amount, attorney’s fees and injunctive relief. On November 22, 2019, the Company filed a Motion to Dismiss for Failure to State a Claim. On April 24, 2020, ZapFraud amended its complaint by alleging that the Company’s email security technology infringes an additional patent that was recently issued to ZapFraud. On May 22, 2020, the Company filed a revised Motion to Dismiss for Failure to State a Claim that responds to ZapFraud’s amended complaint. On September 18, 2020, the court held a hearing on the motion and on November 20, 2020 the magistrate judge issued a recommendation that the court grant the Company’s motion. On December 11, 2020, ZapFraud filed objections to the magistrate judge’s recommendation and the Company responded to those objections on January 4, 2021. On March 25, 2021, the court adopted the recommendation of the magistrate judge, and granted the Company’s motion to dismiss. There are no pending motions and no appeal has been filed. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and potential settlement costs, diversion of management resources and other factors.

From time to time, the Company may be involved in legal proceedings and subject to claims in the ordinary course of business. Although the results of these proceedings and claims cannot be predicted with certainty, the Company does not believe the ultimate cost to resolve these matters would individually, or taken together, have a material adverse effect on the Company’s business, operating results, cash flows or financial condition. Regardless of the outcome, such proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Except as described above, the Company was not subject to any material legal proceedings during the three months ended June 30, 2021 and 2020, and, to the best of its knowledge, except as described above, no material legal proceedings are currently pending or threatened.

Indemnification

In the ordinary course of business, the Company provides indemnifications of varying scope and terms to customers, business partners, vendors, lessors, directors, officers, employees, and other parties with respect to certain matters. Indemnification may include losses from intellectual property infringement claims made by third parties, the Company’s breach of certain agreements, and other liabilities relating to or arising from the Company’s acts or omissions. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future indemnification payments may not be subject to a cap. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular indemnification. Based on historical experience and information known as of June 30, 2021 and March 31, 2021, the Company has not incurred any costs for the above indemnities.

In certain circumstances, the Company warrants that its services will perform in all material respects in accordance with its standard published specification documentation in effect at the time of delivery of the services to the customer for the term of the agreement. To date, the Company has not incurred significant expense under its warranties and, as a result, the Company believes the estimated fair value of these agreements is immaterial.

Security Incident

In January 2021, the Company became aware of a security incident later determined to be conducted by the same sophisticated threat actor responsible for the SolarWinds supply chain attack. The Company immediately launched an internal forensic investigation. The investigation was supported by leading third-party forensics and cyber incident response experts at Mandiant, a division of FireEye, Inc., and in coordination with law enforcement to aid their investigation into this threat actor. During the investigation, the Company learned that the threat actor used the SolarWinds supply-chain compromise to gain access to part of its production grid environment. Using this entry point, the threat actor accessed certain Mimecast-issued certificates and related customer server connection information. The threat actor also accessed a subset of email addresses and other contact information, as well as encrypted and/or hashed and salted credentials. In addition, the threat actor accessed and downloaded a limited number of the Company’s source code repositories, but the Company found no evidence of any modifications to its source code nor does it believe there was any impact on its products. As the investigation progressed, the Company issued a series of advisories to affected customers, including recommended precautionary steps to mitigate risk and, in some cases, to address regulatory requirements. The forensic investigation was completed in March 2021 and the Company has eliminated the threat actor’s access to its environment. The Company has taken a number of actions to prevent future access to its environment and will continue to monitor for threats and take precautionary steps as needed.

The Company is subject to risk and significant uncertainties as a result of this security incident, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. While the investigation is complete, there can be no assurance as to what the overall impact of these events will be. These types of events often have cascading impacts that unfold over time and may result in a loss of revenue, a diminution of the Company’s business prospects and incremental costs, including costs associated with litigation or investigations by regulatory authorities, any of which may adversely impact the Company’s financial results.  

The Company has incurred and expects to incur significant costs related to the security incident. For the year ended March 31, 2021, the Company recorded $0.8 million of pre-tax expenses related to the security incident, net of anticipated insurance recoveries. For the three months ended June 30, 2021, expenses related to the security incident were not material. Expenses include costs of the forensic investigation, remediation costs, and legal and other professional services. It is also expected that the Company will continue to incur costs related to its response, remediation, and investigatory efforts relating to this security incident. While the Company has cyber insurance coverage, the amount of such insurance may be insufficient to compensate for any expenses or losses that may result from the security incident or the insurance carrier may refuse to reimburse the Company for certain costs under the terms of the policy. The full scope of the costs and related impacts of the security incident, including the availability of insurance to offset some of these costs, cannot be estimated at this time.

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Restructuring

3 Months Ended

Jun. 30, 2021

Restructuring And Related Activities [Abstract]

Restructuring

14. Restructuring

Fiscal 2021 Restructuring

On January 28, 2021, the Board of Directors of the Company approved a restructuring plan designed to align the Company’s resources with its strategy. The restructuring plan, which included a reduction of the Company’s workforce by approximately 4%, permitted the Company to increase investment in strategic growth areas. During the year ended March 31, 2021, the Company recognized total pre-tax restructuring charges of $3.3 million, consisting of $3.7 million of severance and other one-time termination benefits, and other restructuring related costs, partially offset by $0.4 million of other adjustments. These charges were primarily cash-based and were recognized in the fourth quarter of fiscal 2021 in Restructuring in the consolidated statements of operations. Restructuring charges during the three months ended June 30, 2021 were not material. The actions associated with the restructuring plan are expected to be completed by the end of the second quarter of fiscal 2022 and the Company does not expect any material costs to be incurred in fiscal 2022.

The following is a rollforward of the Company’s restructuring liability balance:

	Severance and related costs
Balance as of March 31, 2021	$	398
Cash payments		(297	)
Balance as of June 30, 2021	$	101

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Segment and Geographic Information

3 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Segment and Geographic Information

15. Segment and Geographic Information

Geographic Data

The Company allocates, for the purpose of geographic data reporting, its revenue based upon the location of the contracting subsidiary. Total revenue by geographic area was as follows:

	Three months ended June 30,
	2021		2020
United States	$	70,916	$	60,747
United Kingdom		40,343		33,090
South Africa		15,402		11,175
Other		15,888		10,164
Total revenue	$	142,549	$	115,176

Property and equipment, net, by geographic location consists of the following:

	As of June 30,		As of March 31,
	2021		2021
United States	$	40,753	$	40,129
United Kingdom		28,233		28,892
South Africa		7,682		7,942
Other		16,190		15,928
Total	$	92,858	$	92,891

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Income Taxes

3 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The provision for income taxes for the three months ended June 30, 2021 and 2020 was $0.4 million and $0.6 million, respectively, on income before income taxes of $10.4 million and $3.8 million, respectively.

The provision for income taxes for the three months ended June 30, 2021 was primarily attributable to the provision recorded on the earnings of the Company’s profitable entities, partially offset by discrete tax benefits of $1.3 million related to excess tax benefits on share-based compensation realized by U.S. and U.K. employees.

The provision for income taxes for the three months ended June 30, 2020 was primarily attributable to the tax provision recorded on the earnings of the Company’s profitable entities, partially offset by the discrete tax benefit of $0.4 million related to excess tax benefits on non-qualified share option exercises by U.S. employees.

In assessing the Company’s ability to realize its net deferred tax assets, the Company considered various factors including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations to determine whether it is more likely than not that some portion or all of its net deferred tax assets will not be realized. Based upon these factors, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its net deferred tax assets as of June 30, 2021.

During the first quarter of fiscal 2022, the Finance Act 2021 (the Act) was enacted in the United Kingdom. The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021. The effects on the Company’s existing deferred tax balances will be immaterial as a result of the valuation allowance maintained against the Company’s U.K. net deferred tax assets

During the three months ended June 30, 2021, the Company did not have a material change to the Company’s liabilities for uncertain tax positions. As of June 30, 2021, the Company did not have any material uncertain tax positions that would impact the effective tax rate if recognized. Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying condensed consolidated statements of operations. As of June 30, 2021 and March 31, 2021, accrued interest or penalties related to uncertain tax positions were immaterial.

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Summary of Business and Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited. These financial statements and notes should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2021 and related notes, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on May 27, 2021.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements and notes have been prepared on the same basis as the audited consolidated financial statements for the year ended March 31, 2021 contained in the Company’s Annual Report on Form 10-K and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position as of June 30, 2021, and for the three months ended June 30, 2021 and 2020. These interim periods are not necessarily indicative of the results to be expected for any other interim period or the full year.

The Company reclassified certain amounts within its condensed consolidated statement of cash flows to conform to current period presentation. The reclassifications include $0.1 million from other assets and $0.1 million from accrued expenses and other liabilities to deferred income tax benefit for the three months ended June 30, 2020. These reclassifications had no impact on the Company’s previously reported results of operations or balance sheets.

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting period.

Significant estimates relied upon in preparing these condensed consolidated financial statements include revenue recognition, variable consideration, valuation at fair value of assets acquired or sold, including intangible assets, goodwill, tangible assets, and liabilities assumed, amortization periods, expected future cash flows used to evaluate the recoverability of long-lived assets, contingent liabilities, determination of incremental borrowing rates, restructuring liabilities, expensing and capitalization of research and development costs for internal-use software, the determination of the fair value of share-based awards issued, the average period of benefit associated with costs capitalized to obtain revenue contracts and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Due to the global COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of June 30, 2021. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Changes in estimates are recorded in the period in which they become known.

Comprehensive Income

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive income consists of net income and other comprehensive income, which includes certain changes in equity that are excluded from net income. As of June 30, 2021 and March 31, 2021, accumulated other comprehensive income is presented separately on the condensed consolidated balance sheets and consists of cumulative foreign currency translation adjustments.

Revenue and Deferred Revenue

Revenue and Deferred Revenue

Revenue recognized during the three months ended June 30, 2021 and 2020 from amounts included in deferred revenue at the beginning of the respective periods was approximately $99.9 million and $80.8 million, respectively. Revenue recognized during the three months ended June 30, 2021 and 2020 from performance obligations satisfied or partially satisfied in previous periods was not material.

Contracted revenue as of June 30, 2021 and March 31, 2021

that has not yet been recognized (contracted and not recognized) was $116.6 million and $117.5 million, respectively, which includes deferred revenue and non-cancellable amounts that will be invoiced and recognized as revenue in future periods and excludes contracts with an original expected length of one year or less. The Company expects 53% of contracted and not recognized revenue to be recognized over the next year, 46% in years two and three, with the remaining balance recognized thereafter.

Concentration of Credit Risk and Off-Balance Sheet Risk

Concentration of Credit Risk and Off-Balance Sheet Risk

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash, cash equivalents and investments with major financial institutions of high-credit quality. Although the Company deposits its cash with multiple financial institutions, its deposits, at times, may exceed federally insured limits.

Credit risk with respect to accounts receivable is dispersed due to the Company’s large number of customers. The Company’s accounts receivable are derived from revenue earned from customers primarily located in the United States, the United Kingdom, and South Africa. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. The Company estimates credit losses at the reporting date resulting from the inability of its customers to make required payments, including its historical experience of actual losses and the aging of such receivables. These receivables have been pooled by shared risk characteristics. Based on known information the Company may also establish specific allowances for customers in an adverse financial condition or adjust its expectations of changes in conditions that may impact the collectability of outstanding receivables. Credit losses historically have not been significant and the Company generally has not experienced any material losses related to receivables from individual customers, or groups of customers. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. The Company will continue to actively monitor the impact of the global COVID-19 pandemic on expected credit losses. As of June 30, 2021 and March 31, 2021, no individual customer represented more than 10% of the Company’s accounts receivable. During the three months ended June 30, 2021 and 2020, no individual customer represented more than 10% of the Company’s revenue.

When investments are held the Company diversifies its investment portfolio by investing in multiple types of investment-grade securities and attempts to mitigate the risk of loss by using a third-party investment manager. As of June 30, 2021 and March 31, 2021, the Company did not hold any investments.

Cash, Cash Equivalents and Investments

Cash, Cash Equivalents and Investments

The Company considers all highly liquid instruments purchased with an original maturity date of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks, amounts held in interest-bearing money market funds and investments with maturities of 90 days or less from the date of purchase. Cash equivalents are carried at cost, which approximates their fair market value. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their stated maturities as well as the time period the Company intends to hold such securities. The Company determines the appropriate classification of investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company adjusts the cost of investments for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income in the condensed consolidated statements of operations. As of June 30, 2021 and March 31, 2021, cash and cash equivalents of $338.4 million and $292.9 million, respectively, were carried at amortized cost, which approximates their market value.

Internal-use Software Costs

Internal-use Software Costs

Software Development Costs

Costs incurred to develop software applications used in the Company’s SaaS platform consist of certain direct costs of materials and services incurred in developing or obtaining internal-use computer software, and payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the project. These costs generally consist of internal labor during configuration, coding, and testing activities. Research and development costs incurred during the preliminary project stage or costs incurred for data conversion activities, training, maintenance and general and administrative or overhead costs are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. Qualified costs incurred during the operating stage of the Company’s software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs incurred for maintenance of, and minor upgrades and enhancements to, internal-use software are expensed as incurred. During the three months ended June 30, 2021 and 2020, the Company believes the substantial majority of its development efforts were either in the preliminary project stage of development or in the operation stage (post-implementation), and accordingly, no costs have been capitalized during these periods. These costs are included in the accompanying condensed consolidated statements of operations as research and development expense.

Implementation Costs on Cloud-computing Arrangements

As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized implementation costs related to hosting arrangements that were incurred during the application development stage were $2.7 million and $2.9 million, respectively. These capitalized implementation costs will be amortized over the expected term of the arrangement and are amortized in the same line item in the condensed consolidated statements of operations as the expense for fees for the associated hosting arrangement.

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured and Recorded at Fair Value on Recurring Basis

The following table summarizes financial assets measured and recorded at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of June 30, 2021 and March 31, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	June 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,808

	March 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs)
Assets:
Money market funds	$	15,366

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Leases (Tables)

3 Months Ended

Jun. 30, 2021

Leases [Abstract]

Schedule of Components of Lease Expense

The components of lease expense were as follows:

	Three months ended June 30,
	2021		2020
Short-term lease cost	$	26	$	67
Variable lease cost		1,411		1,743
Operating lease cost		9,946		8,377
Finance lease cost:
Amortization of lease assets		250		250
Interest on lease liabilities		3		16
Total finance lease cost	$	253	$	266

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases was as follows:

	Three months ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	9,672	$	9,637
Operating cash outflows from finance leases	$	3	$	20
Financing cash outflows from finance leases	$	273	$	347

Schedule of Weighted-average Remaining Lease Term and Discount Rate

Weighted-average remaining lease term and discount rate:

	As of June 30,			As of March 31,
	2021			2021
Weighted-average remaining lease term (in years)
Operating leases		5.58			5.76
Finance leases		0.39			0.35
Weighted-average discount rate
Operating leases		4.57	%		4.58	%
Finance leases		4.83	%		4.83	%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of June 30, 2021 were as follows:

Year Ending March 31,	Operating Leases			Finance Leases
Remainder of 2022	$	30,453		$	51
2023		32,842			—
2024		24,023			—
2025		22,095			—
2026		17,558			—
Thereafter		32,515			—
Total lease payments		159,486			51
Less: imputed interest		(18,580	)		(1	)
Total lease liabilities	$	140,906		$	50

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Net Income Per Ordinary Share (Tables)

3 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule for Calculation of Basic and Diluted Net Income Per Share

The following table presents the calculation of basic and diluted net income per share for the periods presented (in thousands, except per share data):

	Three months ended June 30,
	2021		2020
Numerator:
Net income	$	10,072	$	3,138
Denominator:
Weighted-average number of ordinary shares used in    computing net income per share applicable    to ordinary shareholders – basic		65,198		63,019
Dilutive effect of share equivalents resulting from    share options, RSUs and ESPP shares		1,736		1,657
Weighted-average number of ordinary shares used in    computing net income per share – diluted		66,934		64,676
Net income per share applicable to ordinary    shareholders:
Basic	$	0.15	$	0.05
Diluted	$	0.15	$	0.05

Dilutive Ordinary Shares Excluded from Calculation of Diluted Weighted Average Shares Outstanding

The following potentially dilutive ordinary share equivalents have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive for the periods presented (in thousands):

	Three months ended June 30,
	2021		2020
Share options outstanding		2,554		4,406
Unvested RSUs		131		520
ESPP shares		72		85

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Share-Based Compensation (Tables)

3 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Weighted Average Assumption Utilized to Determine Fair Value of Option

The fair value of each share option issued under the 2015 Plan was estimated using the Black-Scholes option-pricing model that used the following weighted-average assumptions:

	Three months ended June 30,
	2021			2020
Expected term (in years)		6.1			6.1
Risk-free interest rate		1.4	%		0.6	%
Expected volatility		46.7	%		44.6	%
Expected dividend yield		—	%		—	%
Grant date fair value per ordinary share	$	41.55		$	33.43

Schedule of Share-Based Compensation, Stock Options, Activity

Share option activity under the 2015 Plan and the Historical Plans for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of March 31, 2021		5,322,599		$	34.13		6.81	$	43,683
Options granted		718,423		$	41.55
Options exercised		(672,024	)	$	28.23
Options forfeited and cancelled		(228,711	)	$	39.98
Outstanding as of June 30, 2021		5,140,287		$	35.68		7.33	$	89,286
Exercisable as of June 30, 2021		2,620,341		$	30.72		6.33	$	58,510

Schedule of Share-Based Compensation, RSUs, Activity

RSU activity under the 2015 Plan for the three months ended June 30, 2021 was as follows:

	Number of Awards			Weighted Average Grant Date Fair Value		Intrinsic Value (in thousands)
Unvested RSUs as of March 31, 2021		2,630,359		$	38.62	$	105,767
RSUs granted		1,609,373		$	41.17
RSUs vested		(526,561	)	$	37.10
RSUs forfeited		(325,680	)	$	38.99
Unvested RSUs as of June 30, 2021		3,387,491		$	40.03	$	179,706

Share-Based Compensation Expense Recognized in Statements of Operations

Share-based compensation expense recognized under the 2015 Plan, Historical Plans and ESPP in the accompanying condensed consolidated statements of operations was as follows:

	Three months ended June 30,
	2021		2020
Cost of revenue	$	1,507	$	1,125
Research and development		6,462		3,884
Sales and marketing		5,084		4,437
General and administrative		4,335		4,207
Total share-based compensation expense	$	17,388	$	13,653

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Jun. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Goodwill Balance

The following is a rollforward of the Company’s goodwill balance:

	Three months ended June 30,
	2021
Beginning balance	$	173,952
Effect of foreign exchange rates		2,956
Ending balance	$	176,908

Schedule of Purchased Intangible Assets

Purchased intangible assets consisted of the following: 

	Weighted-
	Average		June 30, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,887	$	(10,387	)	$	29,500
Customer relationships		4		997		(362	)		635
Capitalized software and other (1) (2)		3		25,414		(14,102	)		11,312
			$	66,298	$	(24,851	)	$	41,447

	Weighted-
	Average		March 31, 2021
	Remaining		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying
	(in years)		Value		Amortization			Value
Developed technology		7	$	39,180	$	(9,114	)	$	30,066
Customer relationships		4		984		(318	)		666
Capitalized software and other (1) (2)		3		25,161		(12,700	)		12,461
			$	65,325	$	(22,132	)	$	43,193

(1) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $2.0 million and $2.1 million, respectively, of costs capitalized related to video production costs.

(2) As of June 30, 2021 and March 31, 2021, the net carrying value of capitalized software and other included $0.3 million and $0.3 million of costs capitalized related to IP addresses.

Schedule of Future Estimated Amortization Expense of Acquired Intangible Assets

Future estimated amortization expense of intangible assets as of June 30, 2021, is as follows:

	Purchased Intangible Assets		Capitalized Software
Remainder of 2022	$	3,430	$	3,778
2023		4,573		3,876
2024		4,511		2,101
2025		4,433		1,130
2026		4,355		358
Thereafter		8,833		69
Total	$	30,135	$	11,312

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Debt (Tables)

3 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of Future Minimum Principal Payment Obligations

Future minimum principal payment obligations under the Term Loan and Revolving Facility are as follows:

Fiscal Year Ending March 31,	Debt
Remainder of 2022	$	7,500
2023		10,000
2024		85,000
Total minimum debt payments		102,500
Less: Debt issuance costs		(540	)
Less: Current portion of long-term debt		(9,722	)
Long-term debt	$	92,238

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Restructuring (Tables)

3 Months Ended

Jun. 30, 2021

Restructuring And Related Activities [Abstract]

Schedule of Restructuring Liability Balance

The following is a rollforward of the Company’s restructuring liability balance:

	Severance and related costs
Balance as of March 31, 2021	$	398
Cash payments		(297	)
Balance as of June 30, 2021	$	101

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Segment and Geographic Information (Tables)

3 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Summary of Revenue by Geographic Area

The Company allocates, for the purpose of geographic data reporting, its revenue based upon the location of the contracting subsidiary. Total revenue by geographic area was as follows:

	Three months ended June 30,
	2021		2020
United States	$	70,916	$	60,747
United Kingdom		40,343		33,090
South Africa		15,402		11,175
Other		15,888		10,164
Total revenue	$	142,549	$	115,176

Summary of Property and Equipment, Net by Geographic Location

Property and equipment, net, by geographic location consists of the following:

	As of June 30,		As of March 31,
	2021		2021
United States	$	40,753	$	40,129
United Kingdom		28,233		28,892
South Africa		7,682		7,942
Other		16,190		15,928
Total	$	92,858	$	92,891

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Summary of Business and Significant Accounting Policies - Additional Information (Detail) $ in Millions	3 Months Ended
	Jun. 30, 2020 USD ($)
Accounting Policies [Abstract]
Reclassified from other assets to deferred income tax benefit	$ 0.1
Reclassified from accrued expenses and other liabilities to deferred income tax benefit	$ 0.1

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Revenue and Deferred Revenue - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
Revenue From Contract With Customer [Abstract]
Revenue recognized included in deferred revenue	$ 99.9	$ 80.8
Contracted revenue not yet recognized	$ 116.6		$ 117.5
Contracted revenue not yet recognized, expected timing of satisfaction, explanation	The Company expects 53% of contracted and not recognized revenue to be recognized over the next year, 46% in years two and three, with the remaining balance recognized thereafter.

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Revenue and Deferred Revenue - Additional Information (Detail 1)	Jun. 30, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-07-01
Disaggregation Of Revenue [Line Items]
Revenue, remaining performance obligation, percentage	53.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-07-01
Disaggregation Of Revenue [Line Items]
Revenue, remaining performance obligation, percentage	46.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	24 months

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Concentration of Credit Risk and Off-Balance Sheet Risk - Additional Information (Detail)	3 Months Ended
	Jun. 30, 2021 USD ($) Customer	Jun. 30, 2020 Customer	Mar. 31, 2021 USD ($) Customer
Risks And Uncertainties [Abstract]
Number of customers representing more than 10% of accounts receivable	0		0
Number of customers representing more than 10% of revenue	0	0
Investments | $	$ 0		$ 0

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Cash, Cash Equivalents and Investments - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Cash And Cash Equivalents [Abstract]
Cash and cash equivalents	$ 338,433	$ 292,949

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Fair Value of Financial Instruments - Additional Information (Detail) - Fair Value, Measurements, Recurring [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($)	Jun. 30, 2021	Mar. 31, 2021
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets measured at fair value on a recurring basis	$ 0	$ 0
Liabilities measured at fair value on a recurring basis	$ 0	$ 0

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Fair Value of Financial Instruments - Summary of Financial Assets Measured and Recorded at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Quoted Prices in Active Markets for Identical Assets (Level 1 Inputs) [Member] | Money Market Funds [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total assets	$ 15,808	$ 15,366

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Leases - Additional Information (Detail) $ in Millions	3 Months Ended
	Jun. 30, 2021 USD ($)
Lessee Lease Description [Line Items]
Operating and finance leases, existence of option to extend [true false]	true
Operating and finance leases, option to extend, description	some of which include options to extend the leases for up to 10 years.
Leases not yet commenced, description	the Company had additional leases with future lease payments of $8.9 million, the terms of which have not yet commenced. These leases are expected to commence in the current fiscal year with lease terms of approximately five years.
Leases not yet commenced, value	$ 8.9
Leases, expected to commence, lease term	5 years
Minimum [Member]
Lessee Lease Description [Line Items]
Operating and finance leases, remaining lease term	1 year
Maximum [Member]
Lessee Lease Description [Line Items]
Operating and finance leases, remaining lease term	8 years
Operating and finance leases, renewal term	10 years

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Leases - Schedule of Components of Lease Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Leases [Abstract]
Short-term lease cost	$ 26	$ 67
Variable lease cost	1,411	1,743
Operating lease cost	9,946	8,377
Finance lease cost:
Amortization of lease assets	250	250
Interest on lease liabilities	3	16
Total finance lease cost	$ 253	$ 266

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Leases - Schedule of Supplemental Cash Flow Information Related to Leases (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$ 9,672	$ 9,637
Operating cash outflows from finance leases	3	20
Financing cash outflows from finance leases	$ 273	$ 347

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Leases - Schedule of Weighted-average Remaining Lease Term and Discount Rate (Detail)	Jun. 30, 2021	Mar. 31, 2021
Leases [Abstract]
Operating leases, Weighted-average remaining lease term	5 years 6 months 29 days	5 years 9 months 3 days
Finance leases, Weighted-average remaining lease term	4 months 20 days	4 months 6 days
Operating leases, Weighted-average discount rate	4.57%	4.58%
Finance leases, Weighted-average discount rate	4.83%	4.83%

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Leases - Schedule of Maturities of Lease Liabilities (Detail) $ in Thousands	Jun. 30, 2021 USD ($)
Operating Leases
Remainder of 2022	$ 30,453
2023	32,842
2024	24,023
2025	22,095
2026	17,558
Thereafter	32,515
Total lease payments	159,486
Less: imputed interest	(18,580)
Total lease liabilities	140,906
Finance Leases
Remainder of 2022	51
Total lease payments	51
Less: imputed interest	(1)
Total lease liabilities	$ 50

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Internal-use Software Costs - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
Research And Development [Abstract]
Capitalized costs	$ 0	$ 0
Implementation costs capitalized	$ 2,700,000		$ 2,900,000

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Net Income Per Ordinary Share - Schedule for Calculation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Net income	$ 10,072	$ 3,138
Weighted-average number of ordinary shares used in computing net income per share applicable to ordinary shareholders – basic	65,198	63,019
Dilutive effect of share equivalents resulting from share options, RSUs and ESPP shares	1,736	1,657
Weighted-average number of ordinary shares used in computing net income per share – diluted	66,934	64,676
Net income per share applicable to ordinary shareholders:
Basic	$ 0.15	$ 0.05
Diluted	$ 0.15	$ 0.05

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Net Income Per Ordinary Share - Dilutive Ordinary Shares Excluded from Calculation of Diluted Weighted Average Shares Outstanding (Detail) - shares shares in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive ordinary share equivalents excluded from calculation of diluted weighted-average shares outstanding	2,554	4,406
Unvested Restricted Share Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive ordinary share equivalents excluded from calculation of diluted weighted-average shares outstanding	131	520
ESPP Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive ordinary share equivalents excluded from calculation of diluted weighted-average shares outstanding	72	85

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Share-Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($) CompensationPlan Installment $ / shares shares	Jun. 30, 2020 USD ($) $ / shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of share-based compensation plans | CompensationPlan	2
Weighted average per share fair value of options granted to employees | $ / shares	$ 19.10	$ 14.31
Total intrinsic value of options exercised	$ 13,700	$ 5,400
Proceeds from exercises of share-based awards	18,600	5,000
Share-based compensation expense recognized	17,388	13,653
Share Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized share-based compensation expense	$ 40,000
Unrecognized share-based compensation expense, net of estimated forfeiture, period for recognition	2 years 6 months 29 days
Unvested Restricted Share Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized share-based compensation expense	$ 121,000
Unrecognized share-based compensation expense, net of estimated forfeiture, period for recognition	3 years 2 months 8 days
Unvested Restricted Share Units [Member] | Non-Employee Director [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, vesting period	3 years
Unvested Restricted Share Units [Member] | Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of vesting installment for equity granted | Installment	4
2015 Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options available for future grant | shares	9,600,728
2015 Plan [Member] | Share Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Ordinary shares reserved for future issuance | shares	5,500,000
Increase in number of shares reserved and available for issuance, percentage	5.00%
Share-based compensation arrangement by share-based payment award, term	10 years
Share-based compensation arrangement by share-based payment award, vesting period	4 years
2015 Employee Share Purchase Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, term	6 months
Ordinary shares reserved and authorized for issuance | shares	1,100,000
Authorized payroll deductions percentage	10.00%
Percentage of fair market value of shares to be considered as share price	85.00%
Number of options available for future grant | shares	500,000
Share-based compensation expense recognized	$ 500	500
Cash proceeds from shares purchased in connection with ESPP	$ 3,400	$ 3,100
2015 Employee Share Purchase Plan [Member] | Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Authorized payroll deductions percentage	1.00%

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Share-Based Compensation - Summary of Weighted-Average Assumption Utilized to Determine Fair Value of Option (Detail) - Share Options [Member] - $ / shares	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 years 1 month 6 days	6 years 1 month 6 days
Risk-free interest rate	1.40%	0.60%
Expected volatility	46.70%	44.60%
Grant date fair value per ordinary share	$ 41.55	$ 33.43

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Share-Based Compensation - Schedule of Share-Based Compensation, Stock Options, Activity (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Awards, Beginning balance	5,322,599
Number of Awards, Options granted	718,423
Number of Awards, Options exercised	(672,024)
Number of Awards, Options forfeited and cancelled	(228,711)
Number of Awards, Ending balance	5,140,287	5,322,599
Number of Awards, Exercisable	2,620,341
Weighted Average Exercise Price, Beginning balance	$ 34.13
Weighted Average Exercise Price, Options granted	41.55
Weighted Average Exercise Price, Options exercised	28.23
Weighted Average Exercise Price, Options forfeited and cancelled	39.98
Weighted Average Exercise Price, Ending balance	35.68	$ 34.13
Weighted Average Exercise Price Exercisable	$ 30.72
Weighted Average Remaining Contractual Term, Outstanding	7 years 3 months 29 days	6 years 9 months 21 days
Weighted Average Remaining Contractual Term, Exercisable	6 years 3 months 29 days
Aggregate Intrinsic Value, Outstanding	$ 89,286	$ 43,683
Aggregate Intrinsic Value, Exercisable	$ 58,510

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Share-Based Compensation - Schedule of Share-Based Compensation, RSUs, Activity (Detail) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of Awards Unvested, RSUs Beginning balance | shares	2,630,359
Number of Awards, RSUs granted | shares	1,609,373
Number of Awards, RSUs vested | shares	(526,561)
Number of Awards, RSUs forfeited | shares	(325,680)
Number of Awards, Unvested RSUs, Ending balance | shares	3,387,491
Weighted Average Grant Date Fair Value, Unvested RSUs, Beginning balance | $ / shares	$ 38.62
Weighted Average Grant Date Fair Value, RSUs granted | $ / shares	41.17
Weighted Average Grant Date Fair Value, RSUs vested | $ / shares	37.10
Weighted Average Grant Date Fair Value, RSUs forfeited | $ / shares	38.99
Weighted Average Grant Date Fair Value, Unvested RSUs, Ending balance | $ / shares	$ 40.03
Intrinsic Value, Unvested RSUs, Beginning balance | $	$ 105,767
Intrinsic Value, Unvested RSUs, Ending Balance | $	$ 179,706

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Share-Based Compensation - Share-Based Compensation Expense Recognized in Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total share-based compensation expense	$ 17,388	$ 13,653
Cost of Revenue [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total share-based compensation expense	1,507	1,125
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total share-based compensation expense	6,462	3,884
Sales and Marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total share-based compensation expense	5,084	4,437
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total share-based compensation expense	$ 4,335	$ 4,207

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Acquisitions - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
	Jul. 29, 2020	Jun. 30, 2021	Mar. 31, 2021
Business Acquisition [Line Items]
Goodwill		$ 176,908	$ 173,952
Developed Technology [Member]
Business Acquisition [Line Items]
Estimated Useful Life (in years)		7 years	7 years
Customer Relationships [Member]
Business Acquisition [Line Items]
Estimated Useful Life (in years)		4 years	4 years
eTorch Inc. [Member]
Business Acquisition [Line Items]
Estimated fair values of identifiable intangible assets, amount	$ 3,800
Goodwill	14,100
eTorch Inc. [Member] | Developed Technology [Member]
Business Acquisition [Line Items]
Estimated fair values of identifiable intangible assets, amount	$ 3,500
Estimated Useful Life (in years)	9 years 8 months 12 days
eTorch Inc. [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Estimated fair values of identifiable intangible assets, amount	$ 200
Estimated Useful Life (in years)	6 years 8 months 12 days
eTorch Inc. [Member] | Patent Licenses [Member]
Business Acquisition [Line Items]
Estimated fair values of identifiable intangible assets, amount	$ 100
Estimated Useful Life (in years)	5 years
eTorch Inc. [Member] | Delaware [Member]
Business Acquisition [Line Items]
Business acquisition, effective date of acquisition	Jul. 29, 2020
Cash payment	$ 17,000
Net of cash acquired	$ 400

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Goodwill and Intangible Assets - Schedule of Goodwill Balance (Detail) $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($)
Goodwill Roll Forward
Beginning balance	$ 173,952
Effect of foreign exchange rates	2,956
Ending balance	$ 176,908

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Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021
Finite Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross Carrying Value	$ 66,298	$ 65,325
Accumulated Amortization	(24,851)	(22,132)
Finite-Lived Intangible Assets, Net Carrying Value	$ 41,447	$ 43,193
Developed Technology [Member]
Finite Lived Intangible Assets [Line Items]
Weighted-Average Remaining Useful Life (in years)	7 years	7 years
Finite-Lived Intangible Assets, Gross Carrying Value	$ 39,887	$ 39,180
Accumulated Amortization	(10,387)	(9,114)
Finite-Lived Intangible Assets, Net Carrying Value	$ 29,500	$ 30,066
Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Weighted-Average Remaining Useful Life (in years)	4 years	4 years
Finite-Lived Intangible Assets, Gross Carrying Value	$ 997	$ 984
Accumulated Amortization	(362)	(318)
Finite-Lived Intangible Assets, Net Carrying Value	$ 635	$ 666
Capitalized Software and Other [Member]
Finite Lived Intangible Assets [Line Items]
Weighted-Average Remaining Useful Life (in years)	3 years	3 years
Finite-Lived Intangible Assets, Gross Carrying Value	$ 25,414	$ 25,161
Accumulated Amortization	(14,102)	(12,700)
Finite-Lived Intangible Assets, Net Carrying Value	$ 11,312	$ 12,461

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Goodwill and Intangible Assets - Schedule of Intangible Assets (Parenthetical) (Detail) - USD ($) $ in Millions	Jun. 30, 2021	Mar. 31, 2021
Video Production Costs [Member]
Finite Lived Intangible Assets [Line Items]
Capitalized software and other cost	$ 2.0	$ 2.1
IP Addresses [Member]
Finite Lived Intangible Assets [Line Items]
Capitalized software and other cost	$ 0.3	$ 0.3

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense	$ 2.4	$ 2.1

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Goodwill and Intangible Assets - Schedule of Future Estimated Amortization Expense of Acquired Intangible Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Finite Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Net Carrying Value	$ 41,447	$ 43,193
Purchased Intangible Assets [Member]
Finite Lived Intangible Assets [Line Items]
Remainder of 2022	3,430
2023	4,573
2024	4,511
2025	4,433
2026	4,355
Thereafter	8,833
Finite-Lived Intangible Assets, Net Carrying Value	30,135
Capitalized Software [Member]
Finite Lived Intangible Assets [Line Items]
Remainder of 2022	3,778
2023	3,876
2024	2,101
2025	1,130
2026	358
Thereafter	69
Finite-Lived Intangible Assets, Net Carrying Value	$ 11,312

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Debt - Additional Information (Detail) - USD ($)		3 Months Ended		12 Months Ended
	Jul. 23, 2018	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
Term Loan [Member]
Debt Instrument [Line Items]
Outstanding borrowings		$ 85,000,000.0		$ 86,900,000
Senior Secured Term Loan [Member]
Debt Instrument [Line Items]
Debt issuance costs		500,000		600,000
Senior Secured Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Outstanding borrowings		17,500,000		17,500,000
Amount available under credit facility		30,300,000		30,300,000
Interest expense		400,000	$ 700,000
Senior Secured Revolving Credit Facility [Member] | Other Assets [Member]
Debt Instrument [Line Items]
Debt issuance costs		300,000		300,000
Senior Secured Revolving Credit Facility [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Outstanding borrowings		$ 2,200,000		$ 2,200,000
Credit Agreement with Certain Lenders [Member]
Debt Instrument [Line Items]
Credit facility term	5 years
Credit facility maturity date	Jul. 23, 2023
Credit Agreement with Certain Lenders [Member] | Senior Secured Term Loan [Member]
Debt Instrument [Line Items]
Credit facility amount	$ 100,000,000.0
Credit Agreement with Certain Lenders [Member] | Senior Secured Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility amount	$ 50,000,000.0
Credit Agreement with Certain Lenders [Member] | LIBOR Plus [Member]
Debt Instrument [Line Items]
Credit facility current interest rate		1.375%		1.375%

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Debt - Schedule of Future Minimum Principal Payment Obligations (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Debt Instrument [Line Items]
Less: Current portion of long-term debt	$ (9,722)	$ (9,090)
Long-term debt	92,238	$ 94,671
Senior Secured Term Loan and Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Remainder of 2022	7,500
2023	10,000
2024	85,000
Total minimum debt payments	102,500
Less: Debt issuance costs	(540)
Less: Current portion of long-term debt	(9,722)
Long-term debt	$ 92,238

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Commitments and Contingencies - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Jun. 30, 2021	Mar. 31, 2020
Security Incident [Member]
Commitments And Contingencies [Line Items]
Pre-tax expenses of security incident, net of anticipated insurance recoveries	$ 0	$ 800,000

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Restructuring - Additional Information (Detail) - USD ($)		3 Months Ended	12 Months Ended
	Jan. 28, 2021	Jun. 30, 2021	Mar. 31, 2021
Restructuring And Related Activities [Abstract]
Restructuring plan, percentage reduction in workforce	4.00%
Total pre-tax restructuring charges			$ 3,300,000
Restructuring charges		$ 0	3,700,000
Restructuring charges, other adjustments			$ 400,000

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Restructuring - Schedule of Restructuring Liability Balance (Detail) - Severance and Related Costs [Member] $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($)
Restructuring Cost And Reserve [Line Items]
Balance as of March 31, 2021	$ 398
Cash payments	(297)
Balance as of June 30, 2021	$ 101

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Segment and Geographic Information - Summary of Revenue by Geographic Area (Detail) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	$ 142,549	$ 115,176
United States [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	70,916	60,747
United Kingdom [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	40,343	33,090
South Africa [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	15,402	11,175
Other [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	$ 15,888	$ 10,164

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Segment and Geographic Information - Summary of Property and Equipment, Net by Geographic Location (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021
Segment Reporting, Asset Reconciling Item [Line Items]
Property, plant and equipment, net	$ 92,858	$ 92,891
United States [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Property, plant and equipment, net	40,753	40,129
United Kingdom [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Property, plant and equipment, net	28,233	28,892
South Africa [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Property, plant and equipment, net	7,682	7,942
Other [Member]
Segment Reporting, Asset Reconciling Item [Line Items]
Property, plant and equipment, net	$ 16,190	$ 15,928

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021
Income Taxes [Line Items]
Provision for income taxes	$ 365,000	$ 613,000
Income (loss) before income taxes	10,437,000	3,751,000
Excess tax benefits on non-qualified share option realized	1,300,000	$ 400,000
Liabilities for uncertain tax positions	0
Liabilities for uncertain tax positions that would impact effective tax rate if recognized	$ 0
U. K. [Member]
Income Taxes [Line Items]
Tax at statutory rate	25.00%		19.00%
Finance Act of 2021, change in corporate income tax rate, effective date	Apr. 01, 2023
Finance Act of 2021, enhancement of first-year capital allowance on qualifying new plant and machinery assets, effective date	Apr. 01, 2021