Commvault Announces Fiscal 2024 Second Quarter Financial Results

October 31, 2023

TINTON FALLS, N.J., Oct. 31, 2023 /PRNewswire/ -- Commvault [Nasdaq: CVLT] today announced its financial results for the fiscal second quarter ended September 30, 2023

"Our Q2 total revenue growth accelerated, driven by our hyper-growth SaaS platform, and we delivered robust operating margin leverage," said Sanjay Mirchandani, President and CEO. "Next week, at Commvault SHIFT, we'll unveil our cyber resilience platform, combining our leading data protection capabilities with comprehensive new security and AI-powered innovations that are critical for customers in an era of escalating cyber-attacks."

Notes are contained at the end of this Press Release.

Fiscal 2024 Second Quarter Highlights -

  • Total revenues were $201.0 million, up 7% year over year
  • Total ARR1 grew to $711 million, up 18% year over year
  • Subscription revenue was $97.8 million, up 25% year over year
  • Subscription ARR1 grew to $530 million, up 32% year over year
  • Income from operations (EBIT) was $17.6 million, an operating margin of 8.8%
  • Non-GAAP EBIT2 was $42.0 million, an operating margin of 20.9%
  • Operating cash flow of $40.3 million, with free cash flow2 of $40.1 million
  • Second quarter share repurchases were $31.3 million, or approximately 442,000 shares of common stock

Financial Outlook for Third Quarter and Full Year Fiscal 2024 -

We are providing the following guidance for the third quarter of fiscal year 2024:

  • Total revenues are expected to be between $206 million and $210 million
  • Subscription revenue is expected to be between $106 million and $110 million
  • Non-GAAP operating margin2 is expected to be approximately 21%

We are providing the following updated guidance for the full fiscal year 2024:

  • Total revenues are expected to be between $812 million and $822 million
  • Total ARR1 is expected to grow 14% year over year
  • Subscription revenue is expected to be between $408 million and $418 million
  • Non-GAAP operating margin2 is expected to grow between 50 to 100 basis points year over year
  • Free cash flow2 is expected to be approximately $170 million

The above statements are based on the incorporation of actual second quarter results and current targets. These statements are forward looking and made pursuant to the safe harbor provisions discussed in detail below. We do not undertake any obligation to update these forward-looking statements. Actual results may differ materially from anticipated results.

Conference Call Information

Commvault will host a conference call today, October 31, 2023 at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss quarterly results. The live webcast and call dial-in numbers can be accessed by registering under the "Events" section of Commvault's website. An archived webcast of this conference call will also be available following the call.

About Commvault

Commvault (NASDAQ: CVLT) is a global leader in cloud data protection. Our industry-leading platform redefines the next generation of data protection as the only solution with comprehensive data protection, proactive data defense, advanced ransomware protection, and a single view across all your data. This lets you secure, defend, and recover your data, applications, and production workloads – on-premises, in the cloud, over SaaS, or spread across hybrid and multi-cloud environments. The result is early warning of attacks, active defense to reduce the impact of intrusion, and rapid, accurate recovery of your data. Simply put, Commvault is data, protected. For over 25 years, more than 100,000 organizations have relied on Commvault to keep their data secure and ready to drive business growth.  Learn more at Commvault.com or follow us at @Commvault.

Safe Harbor Statement

This press release may contain forward-looking statements, including statements regarding financial projections, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of software products and related services, general economic conditions, outcome of litigation and others. For a discussion of these and other risks and uncertainties affecting Commvault's business, see "Item IA. Risk Factors" in our annual report on Form 10-K and "Item 1A. Risk Factors" in our most recent quarterly report on Form 10-Q. Statements regarding Commvault's beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from anticipated results. Commvault does not undertake to update its forward-looking statements.

Revenue Overview
($ in thousands)


Q2'23


Q3'23


Q4'23


Q1'24


Q2'24

Revenue Summary:










Subscription

$          78,239


$          87,380


$          94,537


$          97,290


$          97,757

Perpetual license

19,831


19,728


17,561


13,155


14,388

Customer support

77,996


77,665


77,335


76,915


77,019

Other services

11,991


10,301


14,045


10,790


11,833

Total revenues

$        188,057


$        195,074


$        203,478


$        198,150


$        200,997



Q2'23


Q3'23


Q4'23


Q1'24


Q2'24

Y/Y Growth:










Subscription

50 %


13 %


9 %


11 %


25 %

Perpetual license

(28) %


(30) %


(25) %


(26) %


(27) %

Customer support

(11) %


(10) %


(9) %


(5) %


(1) %

Other services

12 %


(8) %


28 %


(4) %


(1) %

Total revenues

6 %


(4) %


(1) %


— %


7 %

Constant Currency
($ in thousands)

The constant currency impact is calculated using the average foreign exchange rates from the prior year period and applying these rates to foreign-denominated revenues in the current corresponding period. Commvault analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations. The non-GAAP financial measures presented in this press release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.


Subscription


Perpetual
License


Customer
Support


Other
Services


Total

Q2'23 Revenue As Reported (GAAP)

$         78,239


$         19,831


$         77,996


$         11,991


$       188,057

Q2'24 Revenue As Reported (GAAP)

$         97,757


$         14,388


$         77,019


$         11,833


$       200,997

% Change Y/Y (GAAP)

25 %


(27) %


(1) %


(1) %


7 %

Constant Currency Impact

$           (953)


$           (328)


$        (1,205)


$           (108)


$        (2,594)

% Change Y/Y Constant Currency

24 %


(29) %


(3) %


(2) %


6 %

Revenues by Geography
($ in thousands)

Our Americas region includes the United States, Canada, and Latin America. Our International region primarily includes Europe, Middle East, Africa, Australia, India, Southeast Asia, and China.


Q2'23


Q3'23


Q4'23


Q1'24


Q2'24


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth

Americas

$  116,191

11 %


$  108,107

(9) %


$  122,337

(1) %


$  122,124

— %


$  120,300

4 %

International

71,866

(2) %


86,967

3 %


81,141

(1) %


76,026

1 %


80,697

12 %

Total revenues

$  188,057

6 %


$  195,074

(4) %


$  203,478

(1) %


$  198,150

— %


$  200,997

7 %

Total ARR and Subscription ARR1
($ in thousands)


Q2'23


Q3'23


Q4'23


Q1'24


Q2'24

Total ARR1

$           604,392


$           640,731


$           668,411


$           686,028


$           711,462

Subscription ARR1

$           400,480


$           442,684


$           477,085


$           499,580


$           529,590

Income from Operations (EBIT)

  • Income from operations (EBIT) was $17.6 million, an 8.8% operating margin
  • Non-GAAP EBIT2 was $42.0 million, a 20.9% operating margin

GAAP and Non-GAAP Net Income2

  • GAAP net income was $13.0 million, or $0.29 per diluted share
  • Non-GAAP net income2 was $31.5 million, or $0.70 per diluted share

Cash Summary and Share Repurchases

  • Cash flow from operations was $40.3 million in the second quarter
  • As of September 30, 2023, ending cash and cash equivalents was approximately $283.3 million
  • During the second quarter, Commvault repurchased $31.3 million, or approximately 442,000 shares, of common stock at an average share price of approximately $70.88 per share

 

Table I

Commvault Systems, Inc.

 

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


Three Months Ended
September 30,


Six Months Ended
September 30,


2023


2022


2023


2022

Revenues:








Subscription

$   97,757


$   78,239


$    195,047


$    165,867

Perpetual license

14,388


19,831


27,543


37,629

Customer support

77,019


77,996


153,934


159,313

Other services

11,833


11,991


22,623


23,229

Total revenues

200,997


188,057


399,147


386,038

Cost of revenues:








Subscription

14,643


8,893


27,006


19,878

Perpetual license

642


656


1,054


1,282

Customer support

14,898


15,423


29,855


30,456

Other services

7,670


7,330


15,488


14,443

Total cost of revenues

37,853


32,302


73,403


66,059

Gross margin

163,144


155,755


325,744


319,979

Operating expenses:








Sales and marketing

84,712


81,299


168,839


166,218

Research and development

31,261


37,053


62,692


77,166

General and administrative

28,002


25,553


54,961


52,529

Restructuring




2,132

Depreciation and amortization

1,535


2,537


3,138


5,172

Total operating expenses

145,510


146,442


289,630


303,217

Income from operations

17,634


9,313


36,114


16,762

Interest income

1,369


291


2,149


552

Interest expense

(112)


(105)


(208)


(210)

Other income (expense), net

(154)


154


187


(235)

Income before income taxes

18,737


9,653


38,242


16,869

Income tax expense

5,720


5,135


12,596


8,840

Net income

$   13,017


$     4,518


$      25,646


$         8,029

Net income per common share:








Basic

$       0.30


$       0.10


$           0.58


$           0.18

Diluted

$       0.29


$       0.10


$           0.57


$           0.18

Weighted average common shares outstanding:








Basic

43,949


44,759


44,003


44,751

Diluted

44,903


45,540


45,010


45,745

 

Table II

Commvault Systems, Inc

 

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



September 30,


March 31,



2023


2023

ASSETS

Current assets:





Cash and cash equivalents


$            283,287


$            287,778

Trade accounts receivable, net


196,434


210,441

Assets held for sale


38,680


38,680

Other current assets


21,560


14,015

Total current assets


539,961


550,914






Property and equipment, net


7,471


8,287

Operating lease assets


12,995


11,784

Deferred commissions cost


58,855


59,612

Intangible assets, net


1,667


2,292

Goodwill


127,780


127,780

Other assets


23,963


21,905

Total assets


$            772,692


$            782,574






LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:





Accounts payable


$                    136


$                    108

Accrued liabilities


93,788


97,888

Current portion of operating lease liabilities


4,848


4,518

Deferred revenue


304,977


307,562

Total current liabilities


403,749


410,076






Deferred revenue, less current portion


174,061


174,393

Deferred tax liabilities, net


495


134

Long-term operating lease liabilities


9,194


8,260

Other liabilities


3,670


3,613






Total stockholders' equity


181,523


186,098

Total liabilities and stockholders' equity


$            772,692


$            782,574

 

Table III

Commvault Systems, Inc

 

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


Three Months Ended
September 30,


Six Months Ended
September 30,


2023


2022


2023


2022

Cash flows from operating activities








Net income

$   13,017


$     4,518


$     25,646


$        8,029

Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization

1,564


2,878


3,196


5,855

Noncash stock-based compensation

23,615


25,327


47,339


56,422

Noncash change in fair value of equity securities

154


(155)


(187)


234

Amortization of deferred commissions cost

6,430


5,442


12,749


10,756

Changes in operating assets and liabilities:








Trade accounts receivable, net

(19,812)


6,474


8,245


15,863

Operating lease assets and liabilities, net

(7)


102


65


(181)

Other current assets and Other assets

(2,439)


2,249


(3,832)


(461)

Deferred commissions cost

(6,961)


(6,365)


(12,561)


(13,017)

Accounts payable

(146)


(695)


32


(213)

Accrued liabilities

15,567


2,762


(3,963)


(28,604)

Deferred revenue

8,959


6,206


1,746


16,464

Other liabilities

396


1,101


899


1,130

Net cash provided by operating activities

40,337


49,844


79,374


72,277

Cash flows from investing activities








Purchase of property and equipment

(266)


(514)


(1,413)


(1,381)

Purchase of equity securities

(260)


(778)


(572)


(1,793)

Net cash used in investing activities

(526)


(1,292)


(1,985)


(3,174)

Cash flows from financing activities








Repurchase of common stock

(31,327)


(39,864)


(82,357)


(58,787)

Proceeds from stock-based compensation plans

5,167


6,672


6,368


7,359

Payment of debt issuance costs




(63)

Net cash used in financing activities

(26,160)


(33,192)


(75,989)


(51,491)

Effects of exchange rate — changes in cash

(4,953)


(11,588)


(5,891)


(22,634)

Net increase (decrease) in cash and cash equivalents

8,698


3,772


(4,491)


(5,022)

Cash and cash equivalents at beginning of period

274,589


258,713


287,778


267,507

Cash and cash equivalents at end of period

$ 283,287


$ 262,485


$   283,287


$   262,485

 

Table IV

Commvault Systems, Inc

 

Reconciliation of GAAP to Non-GAAP Financial Measures

 (In thousands, except per share data)

(Unaudited)


Three Months Ended
September 30,


Six Months Ended
September 30,


2023


2022


2023


2022

Non-GAAP financial measures and reconciliation:








GAAP income from operations

$   17,634


$     9,313


$   36,114


$   16,762

Noncash stock-based compensation3

23,615


25,327


47,339


55,135

FICA and payroll tax expense related to stock-based compensation4

471


425


1,485


1,335

Restructuring5




2,132

Amortization of intangible assets6

312


312


626


626

Non-GAAP income from operations

$   42,032


$   35,377


$   85,564


$   75,990









GAAP net income

$   13,017


$     4,518


$   25,646


$     8,029

Noncash stock-based compensation3

23,615


25,327


47,339


55,135

FICA and payroll tax expense related to stock-based compensation4

471


425


1,485


1,335

Restructuring5




2,132

Amortization of intangible assets6

312


312


626


626

Non-GAAP provision for income taxes adjustment7

(5,927)


(4,508)


(11,081)


(11,706)

Non-GAAP net income

$   31,488


$   26,074


$   64,015


$   55,551









Diluted weighted average shares outstanding

44,903


45,540


45,010


45,745

Non-GAAP diluted earnings per share

$       0.70


$       0.57


$       1.42


$       1.21



Three Months Ended
September 30,


Six Months Ended
September 30,


2023


2022


2023


2022

Non-GAAP free cash flow reconciliation:








GAAP cash provided by operating activities

$   40,337


$   49,844


$   79,374


$   72,277

Purchase of property and equipment

(266)


(514)


(1,413)


(1,381)

Non-GAAP free cash flow

$   40,071


$   49,330


$   77,961


$   70,896

 

Use of Non-GAAP Financial Measures

Commvault has provided in this press release the following non-GAAP financial measures: non-GAAP income from operations (EBIT), non-GAAP income from operations margin, non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP free cash flow, annualized recurring revenue (ARR) and subscription ARR. This financial information has not been prepared in accordance with GAAP. Commvault uses these non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. In addition, Commvault believes these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP financial measures, in evaluating Commvault's ongoing operational performance. Commvault believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Commvault's industry, many of which present similar non-GAAP financial measures to the investment community. Commvault has also provided its revenues on a constant currency basis. Commvault analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations.

All of these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are included in this press release.

Non-GAAP income from operations and non-GAAP income from operations margin. These non-GAAP financial measures exclude noncash stock-based compensation charges and additional Federal Insurance Contribution Act (FICA) and related payroll tax expense incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. Commvault has also excluded restructuring costs and noncash amortization of intangible assets from its non-GAAP results. These expenses are further discussed in Table IV. Commvault believes that these non-GAAP financial measures are useful metrics for management and investors because they compare Commvault's core operating results over multiple periods.  When evaluating the performance of Commvault's operating results and developing short- and long-term plans, Commvault does not consider such expenses. 

Although noncash stock-based compensation and the additional FICA and related payroll tax expenses are necessary to attract and retain employees, Commvault places its primary emphasis on stockholder dilution as compared to the accounting charges related to such equity compensation plans. Commvault believes that providing non-GAAP financial measures that exclude noncash stock-based compensation expense and the additional FICA and related payroll tax expenses incurred on stock option exercises and vesting of restricted stock awards allow investors to make meaningful comparisons between Commvault's operating results and those of other companies.

There are a number of limitations related to the use of non-GAAP income from operations and non-GAAP income from operations margin.  The most significant limitation is that these non-GAAP financial measures exclude certain operating costs, primarily related to noncash stock-based compensation, which is of a recurring nature. Noncash stock-based compensation has been, and will continue to be for the foreseeable future, a significant recurring expense in Commvault's operating results.  In addition, noncash stock-based compensation is an important part of Commvault's employees' compensation and can have a significant impact on their performance. The following table presents the stock-based compensation expense included in cost of revenues, sales and marketing, research and development and general and administrative ($ in thousands):  


Three Months Ended September 30,


Six Months Ended September 30,


2023


2022


2023


2022

Cost of revenues

$                 1,599


$                 1,226


$               3,289


$               2,469

Sales and marketing

9,941


10,165


19,645


21,558

Research and development

5,385


7,793


10,732


17,034

General and administrative

6,690


6,143


13,673


14,074

Stock-based compensation expense

$               23,615


$               25,327


$             47,339


$             55,135

The components that Commvault excludes in its non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP financial measures. Due to the limitations related to the use of non-GAAP measures, Commvault's management assists investors by providing a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Commvault's management uses non-GAAP financial measures only in addition to, and in conjunction with, results presented in accordance with GAAP. 

Non-GAAP net income and non-GAAP diluted earnings per share (EPS).  In addition to the adjustments discussed in non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS incorporates a non-GAAP effective tax rate of 27%. 

Commvault anticipates that in any given period its non-GAAP tax rate may be either higher or lower than the GAAP tax rate as evidenced by historical fluctuations. The GAAP tax rates in recent fiscal years were not meaningful percentages due to the dollar amount of GAAP pre-tax income.  For the same reason as the GAAP tax rates, the estimated cash tax rates in recent fiscal years are not meaningful percentages. Commvault defines its cash tax rate as the total amount of cash income taxes payable for the fiscal year divided by consolidated GAAP pre-tax income. Over time, Commvault believes its GAAP and cash tax rates will align.

Commvault considers non-GAAP net income and non-GAAP diluted EPS useful metrics for Commvault management and its investors for the same basic reasons that Commvault uses non-GAAP income from operations and non-GAAP income from operations margin. In addition, the same limitations as well as management actions to compensate for such limitations described above also apply to Commvault's use of non-GAAP net income and non-GAAP diluted EPS.

Non-GAAP free cash flow.  Commvault defines this non-GAAP financial measure as net cash provided by operating activities less purchases of property and equipment. Commvault considers non-GAAP free cash flow a useful metric for Commvault management and its investors in evaluating Commvault's ability to generate cash from its business operations. In addition, the same limitations as well as management actions to compensate for such limitations described above also apply to Commvault's use of non-GAAP free cash flow.

Notes

  1. Annualized Recurring Revenue (ARR) is defined as the annualized recurring value of all active contracts at the end of a reporting period.  It includes the following contract types: subscription (including term licenses, SaaS and utility software), maintenance contracts related to perpetual licenses, other extended maintenance contracts (enterprise support), and managed services. It excludes any element of the arrangement that is not expected to recur, primarily perpetual licenses and most professional services. Subscription ARR includes only term licenses, SaaS and utility software arrangements. Contracts are annualized by dividing the total contract value by the number of days in the contract term, then multiplying by 365.

    ARR should be viewed independently of GAAP revenue, deferred revenue and unbilled revenue and is not intended to be combined with or to replace those items. ARR is not a forecast of future revenue. Management believes that reviewing this metric, in addition to GAAP results, helps investors and financial analysts understand the value of Commvault's recurring revenue streams versus prior periods.

  2. A reconciliation of GAAP to non-GAAP results has been provided in Financial Statement Table IV included in this press release. An explanation of these measures is also included under the heading "Use of Non-GAAP Financial Measures."

  3. Represents noncash stock-based compensation charges associated with restricted stock units granted and our Employee Stock Purchase Plan, exclusive of stock-based compensation expense related to Commvault's restructuring activities described below in note 5.

  4. Represents additional FICA and related payroll tax expenses incurred by Commvault when employees exercise in-the-money stock options or vest in restricted stock awards.

  5. These restructuring charges relate primarily to severance and related costs associated with headcount reductions and stock-based compensation related to modifications of existing unvested awards granted to certain employees impacted by the restructuring plan.

  6. Represents noncash amortization of intangible assets.

  7. The provision for income taxes is adjusted to reflect Commvault's estimated non-GAAP effective tax rate of 27%.

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SOURCE COMMVAULT

Investor Relations Contact, Michael J. Melnyk, CFA, 732-870-4581, mmelnyk@commvault.com