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<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">   <div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left"> </div> <div align="center" style="font-size: 10pt"><b></b> <b></b></div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>1. Nature of Business</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">CommVault Systems, Inc. and its subsidiaries (“CommVault” or the “Company”) is a leading provider of data and information management software applications and related services. The Company develops, markets and sells a suite of software applications and services, primarily in North America, Europe, Australia and Asia, that provides its customers with high-performance data protection; data migration and archiving; snapshot management and replication of data; embedded deduplication; e-discovery and compliance solutions; enterprise-wide search capabilities; and management and operational reports, remote services and troubleshooting tools. The Company’s unified suite of data and information management software applications, which is sold under the Simpana brand, shares an underlying architecture that has been developed to minimize the cost and complexity of managing data on globally distributed and networked storage infrastructures. The Company also provides its customers with a broad range of professional and customer support services. </div> </div>

<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>2. Basis of Presentation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The consolidated financial statements as of December 31, 2010 and for the three and nine months ended December 31, 2010 and 2009 are unaudited, and in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the financial statements and notes in the Company’s Annual Report on Form 10-K for fiscal 2010. The results reported in these financial statements should not necessarily be taken as indicative of results that may be expected for the entire fiscal year. The balance sheet as of March 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. </div> </div>

<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>3. Summary of Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">There have been no significant changes in the Company’s accounting policies during the nine months ended December 31, 2010 as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended March 31, 2010. A summary of the Company’s significant accounting policies is disclosed below. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments and estimates that affect the amounts reported in the Company’s consolidated financial statements and the accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amounts of revenues and expenses reported for each of its periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, allowance for doubtful accounts, income taxes and related reserves, stock-based compensation and accounting for research and development costs. Actual results could differ from those estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company derives revenues from two primary sources, or elements: software licenses and services. Services include customer support, consulting, assessment and design services, installation services and training. A typical sales arrangement includes both of these elements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For sales arrangements involving multiple elements, the Company recognizes revenue using the residual method. Under the residual method, the Company allocates and defers revenue for the undelivered elements based on relative fair value and recognizes the difference between the total arrangement fee and the amount deferred for the undelivered elements as revenue. The determination of fair value of the undelivered elements in multiple-element arrangements is based on the price charged when such elements are sold separately, which is commonly referred to as vendor-specific objective-evidence, or VSOE. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s software licenses typically provide for a perpetual right to use the Company’s software and are sold on a per-copy basis, on a capacity basis or as site licenses. Software licenses sold on a capacity basis provide the customer with unlimited licenses of specified software products based on a defined level of terabytes of data under management. Site licenses give the customer the additional right to deploy the software on a limited basis during a specified term. The Company recognizes software revenue through direct sales channels upon receipt of a purchase order or other persuasive evidence and when all other basic revenue recognition criteria are met as described below. The Company recognizes software revenue through all indirect sales channels on a sell-through model. A sell-through model requires that the Company recognize revenue when the basic revenue recognition criteria are met as described below and these channels complete the sale of the Company’s software products to the end-user. Revenue from software licenses sold through an original equipment manufacturer partner is recognized upon the receipt of a royalty report or purchase order from that original equipment manufacturer partner. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Services revenue includes revenue from customer support and other professional services. Customer support includes software updates on a when-and-if-available basis, telephone support and bug fixes or patches. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year. To determine the price for the customer support element when sold separately, the Company primarily uses historical renewal rates, and in certain cases, it uses stated renewal rates. Historical renewal rates are supported by performing an analysis in which the Company segregates its customer support renewal contracts into different classes based on specific criteria including, but not limited to, the dollar amount of the software purchased, the level of customer support being provided and the distribution channel. As a result of this analysis, the Company has concluded that it has established VSOE for the different classes of customer support when the support is sold as part of a multiple-element sales arrangement. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s other professional services include consulting, assessment and design services, installation services and training. Other professional services provided by the Company are not mandatory and can also be performed by the customer or a third-party. In addition to a signed purchase order, the Company’s consulting, assessment and design services and installation services are, in some cases, evidenced by a Statement of Work, which defines the specific scope of such services to be performed when sold and performed on a stand-alone basis or included in multiple-element sales arrangements. Revenues from consulting, assessment and design services and installation services are based upon a daily or weekly rate and are recognized when the services are completed. Training includes courses taught by the Company’s instructors or third-party contractors either at one of the Company’s facilities or at the customer’s site. Training fees are recognized after the training course has been provided. Based on the Company’s analysis of such other professional services transactions sold on a stand-alone basis, the Company has concluded it has established VSOE for such other professional services when sold in connection with a multiple-element sales arrangement. The Company generally performs its other professional services within 90 days of entering into an agreement. The price for other professional services has not materially changed for the periods presented. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has analyzed all of the undelivered elements included in its multiple-element sales arrangements and determined that VSOE of fair value exists to allocate revenues to services. Accordingly, assuming all basic revenue recognition criteria are met, software revenue is recognized upon delivery of the software license using the residual method. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company considers the four basic revenue recognition criteria for each of the elements as follows: </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Persuasive evidence of an arrangement with the customer exists. </i>The Company’s customary practice is to require a purchase order and, in some cases, a written contract signed by both the customer and the Company, or other persuasive evidence that an arrangement exists prior to recognizing revenue on an arrangement.</td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Delivery or performance has occurred. </i>The Company’s software applications are usually physically delivered to customers with standard transfer terms such as FOB shipping point. Software and/or software license keys for add-on orders or software updates are typically delivered in an electronic format. If products that are essential to the functionality of the delivered software in an arrangement have not been delivered, the Company does not consider delivery to have occurred. Services revenue is recognized when the services are completed, except for customer support, which is recognized ratably over the term of the customer support agreement, which is typically one year.</td> </tr> <tr> <td style="font-size: 8pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Vendor’s fee is fixed or determinable. </i>The fee customers pay for software applications, customer support and other professional services is negotiated at the outset of a sales arrangement. The fees are therefore considered to be fixed or determinable at the inception of the arrangement.</td> </tr> <tr> <td style="font-size: 8pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Collection is probable. </i>Probability of collection is assessed on a customer-by-customer basis. Each new customer undergoes a credit review process to evaluate its financial position and ability to pay. If the Company determines from the outset of an arrangement that collection is not probable based upon the review process, revenue is recognized at the earlier of when cash is collected or when sufficient credit becomes available, assuming all of the other basic revenue recognition criteria are met.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s sales arrangements generally do not include acceptance clauses. However, if an arrangement does include an acceptance clause, revenue for such an arrangement is deferred and recognized upon acceptance. Acceptance occurs upon the earliest of receipt of a written customer acceptance, waiver of customer acceptance or expiration of the acceptance period. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Income per Common Share</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic net income per common share is computed by dividing net income by the weighted average number of common shares during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and the vesting of restricted stock units. The dilutive effect of such potential common shares is reflected in diluted earnings per share by application of the treasury stock method. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table sets forth the computation of basic and diluted net income per common share: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net income </div></td> <td> </td> <td align="left">$</td> <td align="right">7,252</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,440</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16,169</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">12,593</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Basic net income per common share:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Basic weighted average shares outstanding </div></td> <td> </td> <td> </td> <td align="right">43,318</td> <td> </td> <td> </td> <td> </td> <td align="right">42,270</td> <td> </td> <td> </td> <td> </td> <td align="right">43,132</td> <td> </td> <td> </td> <td> </td> <td align="right">41,929</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Basic net income per common share </div></td> <td> </td> <td align="left">$</td> <td align="right">0.17</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.13</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.37</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.30</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Diluted net income per common share:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Basic weighted average shares outstanding </div></td> <td> </td> <td> </td> <td align="right">43,318</td> <td> </td> <td> </td> <td> </td> <td align="right">42,270</td> <td> </td> <td> </td> <td> </td> <td align="right">43,132</td> <td> </td> <td> </td> <td> </td> <td align="right">41,929</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options and restricted stock units </div></td> <td> </td> <td> </td> <td align="right">2,891</td> <td> </td> <td> </td> <td> </td> <td align="right">3,215</td> <td> </td> <td> </td> <td> </td> <td align="right">2,952</td> <td> </td> <td> </td> <td> </td> <td align="right">2,741</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Diluted weighted average shares outstanding </div></td> <td> </td> <td> </td> <td align="right">46,209</td> <td> </td> <td> </td> <td> </td> <td align="right">45,485</td> <td> </td> <td> </td> <td> </td> <td align="right">46,084</td> <td> </td> <td> </td> <td> </td> <td align="right">44,670</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Diluted net income per common share </div></td> <td> </td> <td align="left">$</td> <td align="right">0.16</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.12</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.35</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">0.28</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The diluted weighted average shares outstanding in the table above exclude outstanding stock options and restricted stock units totaling approximately 1,331 and 459 for the three months ended December 31, 2010 and 2009, respectively, and 877 and 803 for the nine months ended December 31, 2010 and 2009, respectively, because the effect would have been anti-dilutive. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Cash and Cash Equivalents</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. As of December 31, 2010, the Company’s cash and cash equivalents balance consisted primarily of money market funds. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Concentration of Credit Risk</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company grants credit to customers in a wide variety of industries worldwide and generally does not require collateral. Credit losses relating to these customers have been minimal. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Sales through the Company’s reseller and original equipment manufacturer agreements with Dell totaled 23% and 25% of total revenues for the nine months ended December 31, 2010 and 2009, respectively. Dell accounted for 21% and 27% of accounts receivable as of December 31, 2010 and March 31, 2010, respectively. Sales through the Company’s distribution agreement with Arrow Enterprise Computing Solutions, Inc. (“Arrow”) totaled 25% and 24% of total revenues for the nine months ended December 31, 2010 and 2009, respectively. Arrow accounted for approximately 33% and 30% of total accounts receivable as of December 31, 2010 and March 31, 2010, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Fair Value of Financial Instruments</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The carrying amounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments. As of December 31, 2010, the Company’s short-term investments balance consisted of certificates of deposit. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 1 — Quoted prices in active markets for identical assets or liabilities. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 2 — Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes the composition of the Company’s financial assets measured at fair value on a recurring basis at December 31, 2010 and March 31, 2010: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>March 31, 2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Cash and cash equivalents:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Money market funds </div></td> <td> </td> <td align="left">$</td> <td align="right">161,170</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">143,236</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">All of the Company’s financial instruments in the table above were classified and measured as Level I instruments. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Deferred Revenue</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred revenues represent amounts collected from, or invoiced to, customers in excess of revenues recognized. This results primarily from the billing of annual customer support agreements, as well as billings for other professional services fees that have not yet been performed by the Company and billings for license fees that are deferred due to insufficient persuasive evidence that an arrangement exists. The value of deferred revenues will increase or decrease based on the timing of invoices and recognition of software revenue. The Company expenses internal direct and incremental costs related to contract acquisition and origination as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred revenue consists of the following: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>March 31, 2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred software revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">377</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">578</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred services revenue </div></td> <td> </td> <td> </td> <td align="right">90,456</td> <td> </td> <td> </td> <td> </td> <td align="right">82,534</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">$</td> <td align="right">90,833</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">83,112</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-current: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Deferred services revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">12,334</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">9,140</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Accounting for Stock-Based Compensation</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company utilizes the Black-Scholes pricing model to determine the fair value of non-qualified stock options on the dates of grant. Restricted stock units are measured based on the fair market values of the underlying stock on the dates of grant. The Company recognizes stock-based compensation using the straight-line method for all stock awards. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company classifies benefits of tax deductions in excess of the compensation cost recognized (excess tax benefits) as a financing item cash inflow with a corresponding operating cash outflow. For the nine months ended December 31, 2010 and 2009, the Company includes $4,563 and $2,669, respectively, as a financing cash inflow. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Share Repurchases</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company considers all shares repurchased as cancelled shares restored to the status of authorized but unissued shares on the trade date. The aggregate purchase price of the shares of the Company’s common stock repurchased is reflected as a reduction to Stockholders’ Equity. The Company accounts for shares repurchased as an adjustment to common stock (at par value) with the excess repurchase price allocated between Additional Paid-in Capital and Accumulated Deficit. As a result of the Company’s stock repurchases in the nine months ended December 31, 2010, the Company reduced common stock and additional paid-in capital by $7,246 and accumulated deficit by $24,211. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Foreign Currency Translation</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The functional currencies of the Company’s foreign operations are deemed to be the local country’s currency. Assets and liabilities of the Company’s international subsidiaries are translated at their respective period-end exchange rates, and revenues and expenses are translated at average currency exchange rates for the period. The resulting balance sheet translation adjustments are included in Other Comprehensive Income (Loss) and are reflected as a separate component of Stockholders’ Equity. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Foreign currency transaction gains and losses are recorded in “General and administrative expenses” in the Consolidated Statements of Income. The Company recognized a net foreign currency transaction gain of $133 and a net foreign transaction loss of $310 in the three and nine months ended December 31, 2010, respectively, and net foreign currency transaction losses of $150 and $727 in the three and nine months ended December 31, 2009, respectively. The net foreign currency transaction gains and losses recorded in “General and administrative expenses” include settlement gains and losses on forward contracts disclosed below. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To date, the Company has selectively hedged its exposure to foreign currency transaction gains and losses on the balance sheet through the use of forward contracts, which were not designated as hedging instruments. The duration of forward contracts utilized for hedging the Company’s balance sheet exposure is approximately one month. As of December 31, 2010 and March 31, 2010, the Company did not have any forward contracts outstanding. In the three and nine months ended December 31, 2010, the Company recorded net realized gains of $16 and $40, respectively, in general and administrative expenses related to the settlement of forward exchange contracts. In the three and nine months ended December 31, 2009, the Company recorded net realized gains of $22 and $5, respectively, in general and administrative expenses related to the settlement of a forward exchange contracts. In the future, the Company may enter into additional foreign currency-based hedging contracts to reduce its exposure to significant fluctuations in currency exchange rates on the balance sheet. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Comprehensive Income</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Comprehensive income is defined to include all changes in equity, except those resulting from investments by stockholders and distribution to stockholders. Comprehensive income for the three and nine months ended December 31, 2010 and 2009 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr>   <tr valign="bottom" style="padding-top: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net income </div></td> <td> </td> <td align="left">$</td> <td align="right">7,252</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,440</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16,169</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">12,593</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment </div></td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> <td> </td> <td> </td> <td align="right">96</td> <td> </td> <td> </td> <td> </td> <td align="right">413</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(109</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total comprehensive income </div></td> <td> </td> <td align="left">$</td> <td align="right">7,303</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">5,536</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16,582</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">12,484</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Impact of Recently Issued Accounting Standards</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In January 2010, the FASB issued guidance requiring additional disclosure for significant transfers in and out of Levels 1 and 2 fair value measurements and the reasons for such transfers. This new guidance also requires separate disclosure information about purchases, sales, issuances, and settlements (on a gross basis rather than as one net number) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). In addition, this guidance clarifies existing disclosures regarding fair value measurement for each class of assets and liabilities and the valuation techniques and inputs used to measure fair value for recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. The changes under this new guidance were effective for the quarterly period beginning January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for the Company’s fiscal year beginning April 1, 2011. The Company believes that the adoption of these new accounting pronouncements will not have a material impact on its consolidated financial position, results of operations or cash flows. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>4. Credit Facility</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July 2009, the Company entered into an amended and restated credit facility in which the Company can borrow up to $30,000 over a three year period. Borrowings under the amended and restated credit facility are available to repurchase the Company’s common stock under its share repurchase program and to provide for working capital and general corporate purposes. Repayment of principal amounts borrowed under the amended and restated credit facility is required at the maturity date of July 2012. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The amended and restated credit facility contains financial covenants that require the Company to maintain a quick ratio and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the credit agreement. Borrowings under the amended and restated credit facility bear interest, at the Company’s option, at either i) LIBOR plus a margin ranging from 2.25% to 2.75% or ii) the bank’s base rate plus a margin ranging from 1.75% to 2.25%. The bank’s base rate is defined as the higher of the federal funds rate plus 1.5%, one-month LIBOR plus 1.5%, or the lender’s prime rate. The Company pays a quarterly commitment fee that ranges from 0.35% to 0.50% per annum based on the unused portion of the amended and restated credit facility. As of December 31, 2010, the Company was in compliance with all required covenants, and there were no outstanding balances on the amended and restated credit facility. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>5. Contingencies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the normal course of its business, the Company may be involved in various claims, negotiations and legal actions; however, as of December 31, 2010, the Company is not party to any litigation that is expected to have a material effect on the Company’s financial position, results of operations or cash flows. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>6. Capitalization</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In January 2008, the Company’s Board of Directors approved a stock repurchase program, which authorized the Company to repurchase up to $40,000 of its common stock. The Company’s Board of Directors authorized additional increases of $40,000 in July 2008 and $40,000 in July 2010 to the Company’s existing share repurchase program. As of December 31, 2010, the Company is authorized to repurchase up to a total of $120,000 of its common stock through March 31, 2012. As of December 31, 2010, the Company has repurchased approximately $71,748 under the share repurchase authorization and may repurchase an additional $48,252 of its common stock under the current program through March 31, 2012. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On November 13, 2008, the Board of Directors of the Company adopted a Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock to shareholders of record on November 24, 2008. Each Right, when exercisable, entitles the registered holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of eighty dollars per one one-thousandth of a share, subject to adjustment. Of the 50,000 shares of preferred stock authorized under the Company’s certificate of incorporation, 150 have been designated as Series A Junior Participating Preferred. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Rights will become exercisable following the tenth business day after (i) a person or group announces the acquisition of 15% or more of the Company’s common stock or (ii) commencement of a tender or exchange offer, the consummation of which would result in ownership by the person or group of 15% or more of the Company’s common stock. The Company is also entitled to redeem the Rights at $0.001 per right under certain circumstances. The Rights expire on November 14, 2018, if not exercised or redeemed. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>7. Stock Plans</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of December 31, 2010, the Company maintains two stock incentive plans, the 1996 Stock Option Plan (the “Plan”) and the 2006 Long-Term Stock Incentive Plan (the “LTIP”). </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Under the Plan, the Company may grant non-qualified stock options to purchase 11,705 shares of common stock to certain officers and employees. Stock options are granted at the discretion of the Board and expire 10 years from the date of the grant. At December 31, 2010, there were 556 options available for future grant under the Plan. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The LTIP permits the grant of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance stock awards and stock unit awards based on, or related to, shares of the Company’s common stock. On each April 1, the number of shares available for issuance under the LTIP is increased, if applicable, such that the total number of shares available for awards under the LTIP as of any April 1 is equal to 5% of the number of outstanding shares of the Company’s common stock on that April 1. As of December 31, 2010, approximately 862 shares were available for future issuance under the LTIP. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of December 31, 2010, the Company has granted non-qualified stock options and restricted stock units under its stock incentive plans. Equity awards granted by the Company under its stock incentive plans generally vest quarterly over a four-year period, except that the shares that would otherwise vest quarterly over the first 12 months do not vest until the first anniversary of the grant. During the nine months ended December 31, 2010, the Company granted a total of 53 stock options and 28 restricted stock units to members of the Company’s Board of Directors that vest over a one year period. The Company anticipates that future grants under its stock incentive plans will continue to include both non-qualified stock options and restricted stock units. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company estimated the fair value of stock options granted using the Black-Scholes formula. The average expected life was determined according to the “simplified method”, which is the mid-point between the vesting date and the end of the contractual term. The Company will continue to use the “simplified” method until it has enough historical experience to provide a reasonable estimate of expected term. The risk-free interest rate is determined by reference to U.S. Treasury yield curve rates with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on the Company’s historical analysis of actual stock option forfeitures. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Expected volatility through the quarter ended September 30, 2008 was calculated based on reported data for a peer group of publicly traded companies for which historical information was available. During the quarter ended December 31, 2008, the Company began to incorporate its own data into the expected volatility assumption. The Company modified its expected volatility calculation because its common stock had been publically traded for 2 years and it believed that CommVault specific volatility inputs should be included in the calculation of expected volatility. As a result, expected volatility during the nine months ended December 31, 2010 and 2009 was calculated based on a blended approach that included historical volatility of a peer group, the implied volatility of the Company’s traded options with a remaining maturity greater than six months and the historical realized volatility of its common stock from the date of its initial public offering to the respective stock option grant date. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The assumptions used in the Black-Scholes option-pricing model are as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="11%"> </td> <td width="3%"> </td> <td width="11%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Three Months Ended December 31,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Nine Months Ended December 31,</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>2009</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Dividend yield </div></td> <td> </td> <td align="center" valign="bottom">None</td> <td> </td> <td align="center" valign="bottom">None</td> <td> </td> <td align="center" valign="bottom">None</td> <td> </td> <td align="center" valign="bottom">None</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Expected volatility </div></td> <td> </td> <td align="center" valign="bottom">42%-45%</td> <td> </td> <td align="center" valign="bottom">42%-45%</td> <td> </td> <td align="center" valign="bottom">40%-45%</td> <td> </td> <td align="center" valign="bottom">41%-45%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average expected volatility </div></td> <td> </td> <td align="center" valign="bottom">45%</td> <td> </td> <td align="center" valign="bottom">42%</td> <td> </td> <td align="center" valign="bottom">45%</td> <td> </td> <td align="center" valign="bottom">42%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Risk-free interest rates </div></td> <td> </td> <td align="center" valign="bottom">1.18%-2.46%</td> <td> </td> <td align="center" valign="bottom">2.63%-2.69%</td> <td> </td> <td align="center" valign="bottom">1.18%-2.93%</td> <td> </td> <td align="center" valign="bottom">2.30%-3.14%</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Expected life (in years) </div></td> <td> </td> <td align="center" valign="bottom">6.2</td> <td> </td> <td align="center" valign="bottom">6.4</td> <td> </td> <td align="center" valign="bottom">6.2</td> <td> </td> <td align="center" valign="bottom">6.3</td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents the stock-based compensation expense included in cost of services revenue, sales and marketing, research and development and general and administrative expenses for the three and nine months ended December 31, 2010 and 2009. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cost of services revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">101</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">104</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">275</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">350</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Sales and marketing </div></td> <td> </td> <td> </td> <td align="right">1,887</td> <td> </td> <td> </td> <td> </td> <td align="right">1,554</td> <td> </td> <td> </td> <td> </td> <td align="right">5,041</td> <td> </td> <td> </td> <td> </td> <td align="right">5,170</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">464</td> <td> </td> <td> </td> <td> </td> <td align="right">533</td> <td> </td> <td> </td> <td> </td> <td align="right">1,222</td> <td> </td> <td> </td> <td> </td> <td align="right">1,765</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">General and administrative </div></td> <td> </td> <td> </td> <td align="right">1,736</td> <td> </td> <td> </td> <td> </td> <td align="right">1,325</td> <td> </td> <td> </td> <td> </td> <td align="right">4,610</td> <td> </td> <td> </td> <td> </td> <td align="right">4,121</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense </div></td> <td> </td> <td align="left">$</td> <td align="right">4,188</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">3,516</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11,148</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">11,406</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of December 31, 2010, there was approximately $37,892 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested stock option and restricted stock unit awards that is expected to be recognized over a weighted average period of 2.76 years. To the extent the actual forfeiture rate is different from what the Company has anticipated, stock-based compensation related to these awards will be different from the Company’s expectations. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following summarizes the activity for the Company’s two stock incentive plans for the nine months ended December 31, 2010: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="44%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Term</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Options</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Options</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Years)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Outstanding as of March 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">8,070</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10.38</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Options granted </div></td> <td> </td> <td> </td> <td align="right">1,065</td> <td> </td> <td> </td> <td> </td> <td align="right">26.89</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Options exercised </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,709</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">8.12</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Options forfeited </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(138</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">15.31</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Options expired </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(15</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">12.09</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Outstanding as of December 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">7,273</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">13.24</td> <td> </td> <td> </td> <td> </td> <td align="right">6.32</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">111,995</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Vested or expected to vest as of December 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">7,137</td> <td> </td> <td> </td> <td> </td> <td align="right">12.97</td> <td> </td> <td> </td> <td> </td> <td align="right">6.24</td> <td> </td> <td> </td> <td> </td> <td align="right">111,093</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Exercisable as of December 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">4,598</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">9.25</td> <td> </td> <td> </td> <td> </td> <td align="right">4.94</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">89,054</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The weighted average fair value of stock options granted was $12.21 per share and $12.11 per share during the three and nine months ended December 31, 2010, respectively, and $10.27 per share and $9.35 per share during the three and nine months ended December 31, 2009, respectively. The total intrinsic value of options exercised was $9,985 and $29,520 during the three and nine months ended December 31, 2010, respectively, and $5,964 and $9,732 during the three and nine months ended December 31, 2009, respectively. The Company’s policy is to issue new shares upon exercise of options as the Company does not hold shares in treasury. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Restricted stock unit activity for the nine months ended December 31, 2010 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="72%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Average Grant</b></td> <td> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Non-vested Restricted Stock Units</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Awards</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Date Fair Value</b></td> <td> </td> </tr>   <tr valign="bottom" style="padding-top: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="left" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-vested as of March 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">1,011</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">15.33</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Awarded </div></td> <td> </td> <td> </td> <td align="right">462</td> <td> </td> <td> </td> <td> </td> <td align="right">26.35</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Released </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(331</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">14.40</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Forfeited </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(82</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">17.05</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Non-vested as of December 31, 2010 </div></td> <td> </td> <td> </td> <td align="right">1,060</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">20.30</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>8. Income Taxes</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes. The Company’s net deferred tax assets relate primarily to federal and state research tax credit carryforwards, stock-based compensation and foreign net operating loss carry forwards. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent that the Company believes recovery is not likely, the Company establishes a valuation allowance. In addition, the Company reviews the expected annual effective income tax rate and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual income, changes to the actual and forecasted permanent book-to-tax differences, or changes resulting from the impact of a tax law change. As of December 31, 2010, the Company does not maintain a valuation allowance against any of its deferred tax assets. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Income tax expense was $3,368 and $7,571 in the three and nine months ended December 31, 2010 compared to $3,742 and $9,339 in the three and nine months ended December 31, 2009. The effective tax rate in both the three and nine months ended December 31, 2010 was 32%. The effective rate in the three months ended December 31, 2010 is lower than the expected federal statutory rate of 35% primarily due to the reinstatement of the research and development tax credit, partially offset by state income taxes and permanent differences in both the United States and foreign jurisdictions. The effective rate in the nine months ended December 31, 2010 is lower than the expected federal statutory rate of 35% primarily due to the reversal of certain tax reserves totaling $1,080 as a result of the expiration of a statute of limitations in a foreign jurisdiction as well as the reinstatement of the research and development tax credit, partially offset by state income taxes and permanent differences in both the United States and foreign jurisdictions. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The provision for income taxes for the three and nine months ended December 31, 2009 was $3,742 and $9,339, respectively, with effective tax rates of approximately 41% and 43%, respectively. In the three months ended December 31, 2009, the effective rate is higher than the expected federal statutory rate of 35% primarily due to state income taxes and permanent differences mainly in the United States, partially offset by research and foreign tax credits. In the nine months ended December 31, 2009, the effective rate is higher than the expected federal statutory rate of 35% primarily due to state income taxes, permanent differences mainly in the United States and adjustments to tax reserves, partially offset by research and foreign tax credits as well as tax return accrual adjustments. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in each of its tax jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. A number of years may lapse before a particular matter is audited and finally resolved. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="86%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at March 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">5,229</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Additions for tax positions related to fiscal 2011 </div></td> <td> </td> <td> </td> <td align="right">343</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Additions for tax positions related to prior years </div></td> <td> </td> <td> </td> <td align="right">86</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Settlements </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Reductions related to the expiration of statutes of limitations </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(751</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2010 </div></td> <td> </td> <td align="left">$</td> <td align="right">4,903</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the nine months ended December 31, 2010, the Company recognized $751 of previously unrecognized tax benefits and approximately $329 of related accrued interest and penalties totaling $1,080 as a result of the expiration of a statute of limitations in a foreign jurisdiction. The Company believes that it is reasonably possible that approximately $665 of the currently remaining unrecognized tax benefits and approximately $165 of related accrued interest and penalties may also be realized by the end of the fiscal year ending March 31, 2011 as a result of the lapse of the statute of limitations. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">All of the Company’s unrecognized tax benefits at December 31, 2010 of $4,903, if recognized, would favorably affect the effective tax rate. Components of the reserve are classified as either current or long-term in the Consolidated Balance Sheet based on when the Company expects each of the items to be settled. Accordingly, the Company has recorded its unrecognized tax benefits of $4,903 and $5,229 and the related accrued interest and penalties of $1,181 and $1,394 in Other Liabilities on the Consolidated Balance Sheet at December 31, 2010 and March 31, 2010, respectively. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. In the nine months ended December 31, 2010 and 2009, the Company recognized $116 and $105, respectively, of interest and penalties in the Consolidated Statement of Income. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company conducts business globally and as a result, files income tax returns in the United States and in various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Australia, Canada, Germany, Netherlands and United Kingdom. The following table summarizes the tax years in the Company’s major tax jurisdictions that remain subject to income tax examinations by tax authorities as of December 31, 2010. The years subject to income tax examination in the Company’s foreign jurisdictions cover the maximum time period with respect to these jurisdictions. Due to NOL carryforwards, in some cases the tax years continue to remain subject to examination with respect to such NOLs. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="86%"> </td> <td width="3%"> </td> <td width="11%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Years Subject to Income</b></td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Tax Jurisdiction</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Tax Examination</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="bottom"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">U.S. Federal </div></td> <td> </td> <td align="center" valign="bottom">2001 - Present</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">New Jersey </div></td> <td> </td> <td align="center" valign="bottom">2002 - Present</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign jurisdictions </div></td> <td> </td> <td align="center" valign="bottom">2006 - Present</td> </tr>  </table> </div> </div>

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