Commvault Systems (CVLT) 27 Jul 212022 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Commvault Q1 Fiscal '22 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over Director to I Investor would speaker conference to like Melnyk, now your the today, Relations. of Mike Please go ahead.

to in and earnings 'XX for for morning, first dialing Good our fiscal thanks results. call discuss year our quarter today

I'd the to services manufacturing, performance. remind due marketing statements, the and delays products uncertainties, of future based we pursuant projections the this provisions are on include development, the forward-looking during Securities statements relate Private beliefs, our everyone call, factors, statements regarding software to and inherent and related end such current begin, intentions with economic as plans, to Litigation Before risk including competitive at in general the that results the statements difficulties materially that Reform expectations safe made expectations. including and and financial are of differ call, and regarding harbor Act of All conditions. XXXX Actual and the like to sale question-and-answer session of our future the may may or

in recent discussion call annual XX-K XX-Q other of The conference in SEC these this contained no the website. uncertainties and on and company our report please update quarterly release most our report information filings cautionary in in a undertakes statements see and circumstance. press on responsibility risk other any on and factors risk our contained in business, and our the under to Form the For affecting and our Form

remain or as and well In discretion. product features any sole our development release addition, the at functionality timing of as

call Relations our reconciliation be available measures. webcast. This the services On and Commvault; webcast furnished on available Commvault. me Mirchandani, issued is related has conference GAAP release the refer and our press Chief Sanjay President non-GAAP also Carolan, Brian before being non-GAAP we of X-K on will recorded, this today's press will call. wire Officer Sanjay between announcement to the a Chief website. can found was an this be call, this morning Officer A opening the as replay The remarks commentary available of for call on is the archive Brian is to each are conference to An filing. of earlier morning Financial and on we release and been our website Our over Q&A. website. With SEC and call following the Investor financial Executive measures share and and for will today's open

call over I'll Now turn the to Sanjay.

Good morning, for us morning. joining and you thank this

continues, pandemic and you're the healthy all As well. remaining hope I

near-term start saw our release are earnings and QX consistent in morning, the with to year off our we to As our a they are you this results, solid with expectations.

X% revenue Software grew grew X% revenue total year-on-year. and

Our year-on-year, service total our of by Metallic subscription grew data a ARR the new strength as XX% driven offering. continued customers protection and

dedication resonating return quarter-over-quarter. are transition that and strategy would be recurring. We make customers paused in QX data attacks. in the a recurring the pandemic And I to as our IT rise cloud-based portfolio. a transformation around margin we all world. the the so The like non-GAAP our $X.XX. into This of will extend market posting But anticipated employees, multiproduct responsibly, achieving increased is full and without XX.X% would of and adoption a and ransomware non-GAAP discuss possible EBIT first, EPS the my of hard grew time swing, not they work revisit and delve further at priorities product continued with evidence our being and both of progress couldn't it contribution better revenue total have few as in new a sincere our thanks intelligent market platform let's the with the Vaulters services revenue Brian with companies during to We our happened grapple to we to office, XX% financials on minutes. saw more and

At and business working the remotely and Commvault, companies as as broadest do and before by across the even capabilities. support We clouds percentage know, leading security, environment, choice And has data significant advantage of forever. and environments, Yet, compliance employees data needs locations, governance we taking these help this the people, manage had provide around in COVID, by you a and protection, As management workload always their more offering more modernize ultimate are industry solutions through us data applications with glass. of appliance, flexibility helping they globally. with This managed turning of competitive we've a their software, single SaaS, new resources costs. our expand service to and new managed is world. pane existing in with or systems pandemic customers them land in changed to and talent differentiation and delivering customers are the multiple all effectively us address data to

and Harel In Microsoft that data software needed to Office and attacks. For as to Cloud data. ransomware petabytes up data could cloud minimize risk Group, be largest including enable mailboxes, to reduce of Service Israel's recovered costs over protect the on-premise. as infrastructure of moving for insurance of back and Azure, example, providers, our of Metallic X.X ensure Office reliably protect uses Storage protected one their Harel XXX, thousands to XXX, on-premise Metallic's easily Harel and

Speaking of ransomware.

from customers disruption more we data security existing for the ransomware During minimize and recover from attacks. saw also help our demand them to quarter, services

was Commvault reduce risks threats. of recent In decision have a fact, In our customers to over choose other IDC desire to these we triggered from ransomware said with survey of daily Commvault by conversations their and a respondents XXX customers, XX% prospects. and

their software. XX% nearly ransomware more deploying to importantly, felt More they that those surveyed attack of from recover after a Commvault said confident ability in

new legacy to because ransomware and our chose one For in instance, primarily largest nation's customer This layered our billion over of and of approach over ATMs. a wins banks recovery. QX thousands among of $XXX the with was Commvault assets branches incumbent

also Cloud cloud-leaning more Solutions Gartner's for protect protection of both vendor all services were Enterprise was leader cost And Services, Metallic, and Radar Metallic of We're protection. else of offerings of immutable X, not Storage across with breadth SMB. Service, industry and customers Backup of Recovery which categories local intelligent data competition can data to capabilities MCSS. flexibility beat a bring GigaOM in standardized Metallic customers. Metallic Our and copies X but Software NetApp, for recently Isilon operating Commvault It's lower to garner our match. management a its power to cloud key continues looking reports. of an accolades. for named XXXX last Tower is across and We our for HyperScale cloud criteria and the one highly in top-rated Research enterprise ability provides outperformer The entire Dell-EMC, time. data just gapped HyperScale ability Magic week, petabytes X leader resonating the air hybrid reports Commvault to to only existing provide platform our Quadrant evaluation a of capabilities tenth innovation our address in with simplify Commvault named straight attracting needs data platform and numerous on with HyperScale chose alongside the ownership as easy-to-adopt, secure no an Capital across the we the customers provide and their Cloud This and and with based both new costs, for copies environment GigaOM customers backup can both more new and environment. total combined in

workloads in star in managed seeing report I'd very SaaS managed a a are services interest intelligent portfolio. that sorry, Now the to services migrating and excited moment momentum. We're to to and like discuss rising -- I'm take continues show our resources constrained a Metallic, organizations SaaS data with cloud. Metallic as increased in services to to strong more

we're of through most Metallic are new In net fact, workloads. managing workloads the

that and over Metallic solution. continued have platform XXX QX, Over Commvault all across can net sizes are of enterprise-grade and growth as another XX% types of our total Commvault, more of than new customers. We service customers data those customer data. customers at customers to demonstrated scale impress half of new Metallic segments, are In quarter-on-quarter with using our protection a

seen quarter. Metallic high-ready number data than these customers adoption And and new of Metallic offering. ARR. choosing doubled greater $XXX,XXX Cloud, exciting certification are a them Metallic than footprint We are rapidly X Another the the achieve to more only our ability industry past Government to this to released in continues offering currently service protection innovate. in customers among time pattern as becoming These Metallic existing nearly X/X FedRAMP land over status. seeing of The our expand customers is customers. continued that with trends we've also with that demonstrate We're enterprise

the that most Given integrity availability Metallic the all Microsoft we government. certification Dynamics stringent confidentiality customers, Backup heightened Microsoft for recognized announced of the X this security protection validates by clouds. In for meets U.S. and QX, completing needs XXX, and Metallic standards

We even for And of MSPs as saw services also new SoftwareONE their offer Metallic customers We launched partner. immediate intelligent for customer more component our company wins models strategy. with design delivered in Directory the demand Azure ago, features. delivery a weeks Active security and we for critical to for choice backup, all and data just services X

growing positioned are ability Metallic to around and continue our data very to help we're momentum, to reach We targets. protection We're new deliver go-to-market this road in of our drive believe industry-leading well map share will and on by large our as our that financial the initiatives a to continue of service winning and expect We we confident agreement achieve innovation market. scale our the the encouraged globe.

it discuss over to financials. the Brian? Now turn I'll Brian to

results and Thanks, X% everyone. chance off 'XX total review the our start. of released recap 'XX, you Sanjay, briefly to fiscal this into the solid had record an million, a Coming of 'XX, I we to fiscal good performance results. morning. Hopefully, a are will we QX earlier reported and first of morning, quarter fiscal year-over-year. revenue $XXX increase In off we the

year-over-year revenue to approximately products increased $XX and million. Software X%

would company's largest the software growth note challenging 'XX, approximately to history, for year-over-year been our over transactions Please we've increased was represented in reminder, XX% of we $XXX,XXX and Revenue a software comparison size transactions QX, without model. In approximately which deal deal increased a XX% $XXX,XXX. and average volume this that have made year-over-year. As XX% single from year-over-year, these revenue. moved in recorded the of subscription quarter. a X% The software-only software-only software hardware QX

primarily $XXX,XXX. Fiscal by resonating approximately and first X% Metallic. and driven Our by from quarter with year-over-year Americas is the under and XX% revenue medium pricing unbundled customers, is enterprise portfolio services continued deals in improvement led Revenue to these small increased The growth EMEA. $XXX year-over-year, revenue saw usage-based software in and grew services transactions we million. being

services the We also professional strong services results delivered the prior in software year. the saw in attached improvement of to as revenue fiscal half we second

a Let me to model. our discuss recurring now transition revenue-based

total revenue revenue. $XX software represented subscription software million of quarter First XX% approximately of

largely Our rate year-over-year XXX%. was increase million, subscription ARR net revenue representing XX% from driven dollar support million. driven subscription $XXX Total by customers maintenance continues and which revenue, largely SaaS, was Total annual or quarter. sequential new exceed growth services of recurring Metallic. to revenue, ARR, by total -- the approximately includes increased $XXX software, strong The XX% and in subscription retention recurring to was

certain both sales and approximately of was cost a expenses, XX $XXX and associated hardware royalties reduction year X% improvement expenses, margins We ago operating our gross of and driven point with profitability. first reported by increased Now expenses increase sales million. of products. that to the of including I'll Total basis hyperscale third-party legacy quarter versus fiscal year-over-year were the The a pass-through absence year-over-year. XX%, discuss

than mostly certain of of The was Our headcount of positions lower was by spending of COVID. expected, timing hiring investments. impacted the because timing

We up in QX. have already started catching

approximately in of solid revenue EBIT million year-over-year. growth XX% Non-GAAP or $XX expenses points to margin and improved resulted year-over-year growth Our lower-than-expected basis non-GAAP XX.X%. XXX EBIT

cash discuss I'll flows and the Now balance sheet.

the quarter we no free EBIT million the from flow performance QX have of to We our For cash the debt strong sheet. with tied to on and continue approximately generated collection approximately $XXX balance of million cash and ended in 'XX. $XX the quarter, receivables

of a We renewals cash QX fiscal the sequential decline first the a seasonal expect concentration flow in operating maintenance lower year. half of as in perpetual result of

shares million. approximately quarter, we X.X repurchased $XX million for the During

share on are approximately As 'XX we our in spend million Since of through $XX.XX. cash approximately the investor XX% through to XX, committed flow repurchased worth we and our event of $XXX average during plus of June 'XX, outlined $XXX event stock fiscal an million FY price repurchases. common January, we free at share have investor

quarter We reasonable. 'XX. software FY of note would QX software imply for outlook $X Please software-only we don't XX% is million million prior year revenue growth included have of quarter. approximately $XX current which financial believe This our approximately street this discuss hardware, I'll Now On XX%. a be year-over-year the expect second of that approximately for pass-through would year-over-year of $XX million revenue growth. to consensus of QX basis,

the year, 'XX renewal that reasonable. believe QX several we total consensus $XXX.X of QX. than fiscal million also current less We be approximately subscription for is dollars last software million Similar opportunity to the revenue to expect street

of the a second the fiscal being full estimate in renewal $XX about For million the this half year, XX% we of year. opportunity of with

revenue the Looking will further be renewals several tailwind out, to continue we expect a years. subscription for next

in office, to a priorities quarter customers' already deal could shift closures. could also is timing large As seasonality a the limited of on some given reminder, resources. impact the strain additional the challenging return And a from IT see typically perspective. organizations as we This QX

let's shift to expenses. Now

QX We to XX%. our We XX% gross incorporated including like plan be margins This our expenses, to center cost of resources expectations. excellence near-term sales to approximately up X% go-to-market. add and XX% approaching total year-over-year. investments in expect in be Metallic, should margins result and These areas to strategic are EBIT to in expenses, both India approximately of and operating

the we expect some temporary of savings to addition, to continue In COVID-related normalize.

remarks. With share back XX turn million some projected now QX Our I Sanjay? for is to call approximately will Sanjay for count shares. closing over the that,

most believe goals We comprehensive cloud the Thanks, the and are positioned to solutions. move embrace to help made and industry's we the into and SaaS for progress We performance we as term. protect tremendous they organizations platform have workloads mission-critical both further Brian. rapidly short meet long well our believe

our With focus that, be that, While our and will we able questions. let's continue growing things execution, open with portfolio up we it amazing have do, help to intelligent we're more data data. customers do to services with optimistic for on to their

[Operator Instructions].

first Rakers question comes of Wells from Your Aaron Fargo.

the kind Congratulations are quarter the if there come guess, to on any the deal, of any you your A How characterize your kind of first right about into questions comments couple end outlook the large question I around the enterprises pause around back towards is possibility deal of quarter. can. of of of quarter? the rates that? think I talked assumptions activity closure September deal Or the in June pipeline, we changes and office. now? into would you kind your as Has start here been the your as what

Aaron, from here. Brian it's Good hear you. to

we're seeing, think issuing seeing encouraged We're basis. what we're I a year-over-year by So is XX% guidance growth. The that on consistency. especially we're growth year-over-year

you hardware, XX%. out If the strip that's

possibility. always coming It's but are that out. from the out So be anything healthy that a calling much We're calling it's seeing, increase specific going to the that perspective. year-over-year is It's We're pandemic we're it just our that's here. People just there's back not very summertime. to office, seasonality.

enough. fair Yes,

a pipeline And there. of then in looks good the fine, deals and mix there's

we stating call more just it, -- it's think. what So more,

going trajectory the was then that consistently year. back you're leverage it question quite is your And other you But at healthy. looks margin laid ask on to Right. that like earlier operating Day out that Analyst you of kind looks this growth I

we you positive the XX% on take curious, about will curious that think to it. of year, drop back as you half model? Brian, kind I'm any back? operating and are thinking above say, the Just invest margin, some of how the go let's we the operating into of willing, that maybe about seasonality that through Or margin, So you're progression upside

what reiterate, bit investments. with confident leverage January doing near-term good about during going of in that we and renewal going back QX, in targets in just especially out. catch again, investor the our in to again, already that laid our a tailwinds. QX. feel out we're And communicated. We event. laid We're more on change revenue We to were subscription our with up. we would those behind comfortable But expect we half opportunity other and those what the little year, we We're not to We're

Piper from comes question James Fish next Your of Sandler.

about So does with bought us happened quarter, exposure as can deal this to a forward? it you Zerto What's of say reminds kind partner? moving HP the lot what here change Dell What the the impact a potentially about And HP out of pre-EMC. here? this of the possibility how partner

very we of is Sure. Partner No, And we XXXX named to Momentum I'd nothing HPE changes is Year. and super out part there. of HPE it's Commvault, We're recently just a GreenLake by strong were have a thing great other relationship. like question. partners, HPE that interesting big And as that to saying each GreenLake, set committed which a the strategy, and

we work them So with their to continue priorities. on strongest

are management, okay? the from delivers the it's data it, Now as our form as Zerto we've core good what way product, a technology seeing of that as technology, as both far in we're our for mind, recovery is the a in do we And well took And I acquisition was capabilities the inside disaster had away concerned, or of momentum. top whether stand-alone it we while.

a workloads, an roughly point, you on think, metric, year-on-year. protect the your I customers. doubled Xx doubled -- virtual have And machines as almost Just the important that year data

is with the And that DR we're name good doesn't game in is business, -- this our traction So seeing of product. a competition change. so this the

to of rate Is you all? $XX different yet? then business Metallic portfolio. Is there That's run fair that rest great. approach go-to-market -- And million here the versus the kind say it nearing a in at on did of the we're

our said, it's I XXX-plus We'll call, on We a shortly. not rising Metallic details more shortly, share this quarter-on-quarter. roughly in star added Like portfolio. but Yes. customers on

muscle into capability. certification up-sell, cross-sell, share trends we're between our say healthy, at of within I workloads set, this Metallic at I workloads a And but point. growth can We're all the product, putting to that's on into this FedRAMP, offerings. products, we're going feature is lot -- all mean, Our looking this between

we're start -- the and. base key takeaway SaaS-based the So of of adding them soon. sharing of seeing which here installed is value power that guess lot we'll working Commvault, a they're We're Many patterns, seeing because the of it's lot very which But great. I a with we're of to logos. good our new is a new increasing

looking are offering quickly. Our at and service a up key this as gets running partners provider them that

on not going say but where we're that this. with the to I very So going number, pleased will comment we're with

I Sanjay, try, it. I Got say didn't can't but...

I wouldn't put it you, man. past

question next Jack Andrews from comes Needham. of Your

wanted the see in the to I you some if could on sub-$XXX,XXX more strength you provide deals. about talked color

If expansion think just that rates and of the we are group on what elaborate you maybe resonating customers. about could products do how from

Brian it's Jack, here.

for question. thanks your So

pipeline, So our from broad think pretty we And a channel. it resonating both product in to saw amount And we're forward. seeing strategic enterprise unbundled portfolio comes sub-$XXX,XXX deals. really for That's and deals deals is move Americas contribution I larger be down of higher which the with velocity the moving this coming us that's We'd and a going between balance nice through our like the encouraging. EMEA. to

to time. was our quarter it that we expand for we in that to continue that, -- and strong increase yes, So expect out going platform a as was

Perfect.

your this time? just maybe changes You then. also how rates just you changing up are Are end. be high multiproduct the could customers the think then may broadly had with expansion at of with to on Commvault? speak trajectory perhaps And some to land-and-expand motion? sizes strength I we how about over with more ASP their deal journey do So certainly starting seeing mean, follow large that portfolio you

Sure.

a a all, comments. that capabilities provides -- So little embracing Power touched -- in an having portfolio Metallic. do way incorporate the whether and seeing And. then it we XXX journey, is of that seeing bit we're I with what down Sanjay. then go prepared It's of we're call my seeing and as really And first delivery there's this engine or on-premise customers land provides we're the of this move the the a other cloud on SaaS-based that more with Metallic like our they the HyperScale flexibility customers between The lot say they combined on-premise, in as Office can way, we that workloads. start X

you do Let's those. protect on-premise you then those those, incorporate to other you protect things Once workloads want on-premise see or with workloads.

And to customers a the our the gives workloads. us of really we few go offer maybe seeing us have. Power to really And more capabilities. different for them back ability So complementary across work just customers really It we're this and didn't years that ago allows

mind in For an ransomware an MCSS, automatically of Services, back and have button the of is a on-premise. call every service then our in they easy are X I Hyperscale which immutable but integrated it of have Metallic can customer, that that their protection And Storage but if Service. an metallic Hyperscale of they're delivered with to they they availing existing Metallic, by They top today where to Metallic through X have it's customer, copy on Cloud their example, they cloud. oversimplified, be got we And capabilities. they a data services Cloud core layer SaaS just their don't with up customer,

pattern I and early-mover we're we're all So matched I advantage mixed this see, here. capabilities think the we going on-premise. between And used and being is to kinds and think have cloud an seeing of

Eric Lake Your next question of comes Martinuzzi from Street.

focus on to wanted the I operating expenses Yes. here.

as QX. we to look Just out

the I the one -- to -- Could you that? understood we First QX get QX quarter. sure the before I charge of make add-backs. wanted restructuring a There wanted I small in sorry, all, of was explain QX, to

that we something And focused our in excellence really wasn't Yes, center with to fiscal thing were in here. impacting We're an resources material Brian ongoing resources of was that out, We move start to It's move something And It be so we're us then catching spend up going there. impacted respect we for in as we to restructuring Obviously really terms weren't that to it's QX. in the just on add really really it's charge by COVID India. COE. didn't hiring in that's consider of on. India. ongoing. to just Eric, able going general be our to the the QX

Okay. of partly sales? rise channel to my Excellence one was you QX, area. sales, investing is with next the is QX? there question, where direct Where are may obviously, else -- -- expenses That expect the we answer which the in Center But

Yes. also We're as channel going as some be Metallic. to of to Absolutely. going in be of and type go-to-market of come expenses investing the in this return normalized pandemic we There's out well in marketing.

a repurchase Okay. in up me. spend? in question second kind Or that was you in of QX? driven by relatively -- should anticipate QX, And we $XX then to sustain were for to QX. is that The comparison from program, in seasonal just the QX, cash million it flow that guys Was million entirely $XX

we QX. in in of in our Yes. full January, share had that of repurchases. a activity had QX I at of months on had X months fiscal Remember, activity we mean the X fiscal fiscal quarter full We so end the QX. announced full we

next comes question of KeyBanc. The from Steve Enders

market. more to seeing broadly catch-up ability to done? get sounds there's and I want you the that labor impacting on just I But their It also the are like is what there customers in guess, out how some seeing quarter. in that check deals you're

customers? it's how your customers I'm our how question I we just pass you're the trying affecting labor with we can market saying -- our or engage seeing are to affecting

parts X that. to guess I So

It the that's ability like hire? how and how catch-up work market to there finding sounds ability but is also labor you Just your and own the current impacting with spend environment customers. one, is there, hiring to happening your that are some

And it onboard, a the how we hybrid? we're work? the facility. generally really quarter, are And been about future. got about a folks try it thinking here. the where within of and to I Is think, the company policy remote? last of there's over going for just the conversations Is course in want workforce lot clean in it Is our to we the bring we've

hybrid. people folks a of we've not but I needed. are that, lot on. it percentage a distributed, a conversations -- have come on-premise of focus and a large had as that So a then work shared from would giving office comments, remote, correctly, were prepared that our -- always we we've of in may they as there's I We would were into few those -- lot the there. that Steve, absolutely company, have needed been And employees like called And my think,

solidified just world. lot more how in infrastructure, work. on a saying we're with investing And and investing collaboration our flexible is changing we've made into this our So it And for that, this employees a they in open eyes employees walking potential tools. we're

and So I think COVID I we're changed to recruit would of able little we little a down I put -- to quarter was think bit the of just talent want. that a Last it just the uncertainty.

-- now. and the catch-up in happening or hire to XQ the Okay. Great. to ability in I mean, I here hear spending good guess,

base, we're customers kind of incremental couple seeing the Metallic has and years within within the the those how bit little within that to rates now you're on that on and a of progressed Just thinking touch Metallic a you're I that, products the about driving side and in that expansion customer for kind into adoption how being additional want of released? more

our off So Metallic. we've gas really of not taken way innovation foot the by around

clouds -- provide. the Microsoft active certification. supporting workload on it's it's the about brought the FedRAMP geographical really X feature slowed whether directory, talk last clouds, I mean, X not or quarters whether We've Metallic X multiple me containers, whether expansion, expansion, it's it's it's whether what minute. Since and just the for expansion, can loop functionality whether down Let a over out innovation product we that the capabilities we've

your on-premise much to which which with give the mix calling future, it's is And, question, The that we and of Power have ability to thing, their keep existing and workloads relates customers that customers of or what second match. is we part them very

SaaS-based your capability, is natural leaning workloads, SaaS-based So to Metallic. a which is

You some on-premise. the those to bring data back workloads, on want that may of edge,

we've magic. of that street. IT with in the -- -- how so capability an then existing day of continuously all -- a on-premise and have the expected match pane glue customers, it's the to again, where is where is the and That's and being Metallic all ease use, our that's not air might secret behind one-way cloud. access Metallic this to That's copy customers single glass, seamlessness and a take hit the needed. this we center and and okay? into this That's gap a want We delivered being more You age Cloud mix through for our done okay? can customers of built literally or the point more technology I'll front the Having new the as does sauce. that professionals our pane can across of not innovate it works And in any They data be is solve It different ransomware problem. Managed Service workload, that button give get problem. creates we -- capability glass a between Storage a and seamlessly called Service, MCSS, be cloud whether remotely, the them single What on-premise. products especially of

call. Thank you participating. This concludes for today's conference

You disconnect. now may