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CommVault Announces First Quarter Fiscal 2013 Financial Results
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OCEANPORT, N.J. — July 31, 2012 — CommVault [NASDAQ: CVLT] today announced its financial results for the first quarter ended June 30, 2012.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

N. Robert Hammer, CommVault's chairman, president and CEO stated, "We began fiscal year 2013 with a solid first quarter which was highlighted by year-over-year software revenue growth of 24% and Non-GAAP operating income growth of 49%. Our year-over-year software revenue growth of 24% was driven by continued demand for our Simpana 9 data and information management software platform across all geographies and strong year-over-year growth in enterprise software deals (transactions greater than $100,000). During the first quarter, we continued to make significant investments to position the company for longer term growth while delivering improved profitability."

Total revenues for the first quarter of fiscal 2013 were $111.3 million, an increase of 22% over the first quarter of fiscal 2012 and a decrease of 2% over the prior quarter. Software revenue in the first quarter of fiscal 2013 was $54.2 million, an increase of 24% year-over-year and a decrease of 8% sequentially. Services revenue in the first quarter of fiscal 2013 was $57.0 million, increases of 19% year-over-year and 3% sequentially.

Income from operations (EBIT) was $16.4 million for the first quarter, a 64% increase from $10.0 million in the same period of the prior year. Non-GAAP income from operations (EBIT) increased 49% to $22.6 million in the first quarter of fiscal 2013 compared to $15.2 million in the first quarter of the prior year. On a sequential basis, Non-GAAP income from operations (EBIT) increased 7% in the first quarter of fiscal 2013.

For the first quarter of fiscal 2013, CommVault reported net income of $10.1 million, an increase of $3.1 million compared to the same period of the prior year. Non-GAAP net income for the quarter increased 47% to $14.4 million, or $0.30 per diluted share, from $9.8 million, or $0.21 per diluted share, in the same period of the prior year.

Operating cash flow totaled $17.9 million for the first quarter of fiscal 2013 compared to $31.1 million in the first quarter of fiscal 2012. Total cash and short-term investments were $320.1 million as of June 30, 2012 compared to $300.2 million as of March 31, 2012. There were no share repurchases during the first quarter of fiscal 2013, which still leaves $52.8 million remaining in the existing repurchase plan available through March 31, 2013.

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 below under the heading "Use of Non-GAAP Financial Measures."

Recent Business Highlights:

·         On June 14, 2012, CommVault announced that it has been positioned in the "Leaders" quadrant of Gartner Inc.'s report, "Magic Quadrant: Enterprise Backup/Recovery Software".1

·         On June 7, 2012, CommVault announced that its Simpana® 9 data and information management software platform is fully compatible with Microsoft Corp.'s newly released SQL Server 2012 Data platform with support for SQL Server's advanced high availability and disaster recovery solutions across physical, virtual and cloud environments.

·         On May 16, 2012, CommVault announced that it is expanding the reach of its customer service operations delivering fully integrated, global technical support capabilities across Asia Pacific and Latin America. This announcement reinforces CommVault's commitment to service and support which incorporates a locally-delivered but globally-integrated, single call queue for handling all customer support incidents consistently and efficiently.

Use of Non-GAAP Financial Measures
CommVault has provided in this press release the following non-GAAP financial measures: non-GAAP income from operations, non-GAAP income from operations margin, non-GAAP net income and non-GAAP diluted earnings per share. This selected 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 provide 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.

These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to, 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 provided in Table IV 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 FICA and related payroll tax expense incurred by CommVault when employees exercise in the money stock options or vest in restricted stock awards. 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. In addition, because of the varying available valuation methodologies, subjective assumptions such as volatility outside CommVault's control and the variety of awards that companies can issue, 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. Lastly, the components 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.

CommVault's management generally compensates for limitations described above related to the use of non-GAAP financial measures by providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Further, CommVault 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 EPS. Non-GAAP net income excludes noncash stock-based compensation and the additional FICA and related payroll tax expenses incurred by CommVault when employees exercise in the money stock options or vest in restricted stock awards, which are discussed above, as well as applies a non-GAAP effective tax rate of 37% in fiscal 2013 and 36% in fiscal 2012.

CommVault anticipates that in any given quarter its non-GAAP tax rate may be either higher or lower than the GAAP tax rate as evidenced by historical fluctuations. The GAAP tax rate for the three months ended June 30, 2012 was 39% and the GAAP tax rate for the three months ended June 30, 2011 was 31%. On an annual basis, the GAAP tax rate over the past six fiscal years was 36% for fiscal 2012, 42% for fiscal 2011, 43% for fiscal 2010, 44% for fiscal 2009, 23% for fiscal 2008 and (241%) for fiscal 2007. In addition, CommVault's cash tax rate has been significantly lower than its GAAP tax rate for the past three fiscal years. The cash tax rate over the past three fiscal years is estimated to be approximately 14% for fiscal 2012, approximately 11% for fiscal 2011, and approximately 10% for fiscal 2010. Also, the cash tax rate for the three months ended June 30, 2012 is estimated to be approximately 27%. CommVault expects that its cash tax rate will remain lower than its GAAP tax rate for the remainder of fiscal 2013 and into fiscal 2014. 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.

CommVault believes that the use of a non-GAAP tax rate is a useful measure as it allows management and investors to compare its operating results on a more consistent basis over the multiple periods presented in its earnings release without the impact of significant variations in the tax rate as more fully described above. It is also more reflective of the increase in the cash tax rate as it approaches the GAAP tax rate over the next one to two fiscal years. Non-GAAP EPS is derived from non-GAAP net income divided by the weighted average shares outstanding on a fully diluted basis.

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 EPS.

Conference Call Information
CommVault will host a conference call today, July 31, 2012, at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss its financial results. To access this call, dial 888-895-5479 (domestic) or 847-619-6250 (international). Investors can also access the webcast by visiting www.commvault.com. The live webcast and replay will be hosted under "Investor Events" located under the "Investor Relations" section of the website. An archived webcast of this conference call will also be available following the call.

1 Gartner Inc., "Magic Quadrant for Enterprise Backup/ Recovery Software," by Dave Russell, Alan Dayley, Sheila Childs, Pushan Rinnen, June 11, 2012

About CommVault
A singular vision — a belief in a better way to address current and future data management needs — guides CommVault in the development of Singular Information Management® solutions for high-performance data protection, universal availability and simplified management of data on complex storage networks. CommVault's exclusive single-platform architecture gives companies unprecedented control over data growth, costs and risk. CommVault's Simpana® software suite of products was designed to work together seamlessly from the ground up, sharing a single code and common function set, to deliver superlative Data Protection, Archive, Replication, Search and Resource Management capabilities. More companies every day join those who have discovered the unparalleled efficiency, performance, reliability, and control only CommVault can offer. Information about CommVault is available at www.commvault.com. CommVault's corporate headquarters is located in Oceanport, New Jersey in the United States.

About the Magic Quadrant
Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Safe Harbor Statement
This press release contains 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 and others. 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.

©1999-2012 CommVault Systems, Inc. All rights reserved. CommVault, CommVault and logo, the "CV" logo, CommVault Systems, Solving Forward, SIM, Singular Information Management, Simpana, CommVault Galaxy, Unified Data Management, QiNetix, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, SnapProtect, Recovery Director, CommServe, CommCell, ROMS, and CommValue are trademarks or registered trademarks of CommVault Systems, Inc. All other third party brands, products, service names, trademarks, or registered service marks are the property of and used to identify the products or services of their respective owners. All specifications are subject to change without notice.

Table I

CommVault Systems, Inc.

Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)

 

Three Months Ended
June 30,

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

      Software

$

54,235

 

$

43,801

      Services

 

57,032

 

 

47,726

Total revenues

 

111,267

 

 

91,527

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

      Software

 

678

 

 

617

      Services

 

14,612

 

 

11,426

Total cost of revenues

 

15,290

 

 

12,043

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

95,977

 

 

79,484

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

      Sales and marketing

 

56,387

 

 

49,758

      Research and development

 

10,951

 

 

9,271

      General and administrative

 

11,090

 

 

9,417

      Depreciation and amortization

 

1,133

 

 

1,025

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

16,416

 

 

10,013

Interest expense

 

 

 

(26)

Interest income

 

236

 

 

165

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

16,652

 

 

10,152

Income tax expense

 

6,527

 

 

3,113

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

10,125

 

$

7,039

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

      Basic

$

0.23

 

$

0.16

      Diluted

$

0.21

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

      Basic

 

44,761

 

 

44,171

      Diluted

 

47,582

 

 

47,268

 

Table II

CommVault Systems, Inc.

Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

 

June 30,
2012

 

March 31,
2012

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

      Cash and cash equivalents

$

318,135

 

$

297,088

      Short-term investments

 

1,948

 

 

3,146

      Trade accounts receivable, net

 

56,524

 

 

67,793

      Prepaid expenses and other current assets

 

11,843

 

 

12,606

      Deferred tax assets, net

 

14,626

 

 

14,717

Total current assets

 

403,076

 

 

395,350

 

 

 

 

 

 

Deferred tax assets, net

 

23,508

 

 

23,861

Property and equipment, net

 

9,546

 

 

8,184

Other assets

 

4,546

 

 

5,293

Total assets

$

440,676

 

$

432,688

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

      Accounts payable

$

2,209

 

$

1,847

      Accrued liabilities

 

35,583

 

 

45,888

      Deferred revenue

 

119,689

 

 

125,314

Total current liabilities

 

157,481

 

 

173,049

 

 

 

 

 

 

Deferred revenue, less current portion

 

24,328

 

 

22,059

Other liabilities

 

7,579

 

 

7,596

 

 

 

 

 

 

Total stockholders' equity

 

251,288

 

 

229,984

Total liabilities and stockholders' equity

$

440,676

 

$

432,688

 

Table III

CommVault Systems, Inc.

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 

 

Three Months Ended
June 30,

 

 

2012

 

2011

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

10,125

 

$

7,039

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

 

 

 

 

 

 

      Depreciation and amortization

 

 

1,160

 

 

1,063

      Noncash stock-based compensation

 

 

5,928

 

 

4,451

      Excess tax benefits from stock-based compensation

 

 

(3,060)

 

 

(1,602)

      Deferred income taxes

 

 

237

 

 

(319)

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

      Trade accounts receivable

 

 

10,304

 

 

14,487

      Prepaid expenses and other current assets

 

 

686

 

 

(1,312)

      Other assets

 

 

664

 

 

(473)

      Accounts payable

 

 

384

 

 

527

      Accrued liabilities

 

 

(7,385)

 

 

2,360

      Deferred revenue

 

 

(1,240)

 

 

4,516

      Other liabilities

 

 

106

 

 

356

Net cash provided by operating activities

 

 

17,909

 

 

31,093

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of short term investments

 

 

(1,948)

 

 

(3,146)

Proceeds from maturity of short-term investments

 

 

3,146

 

 

1,150

Purchase of property and equipment

 

 

(1,681)

 

 

(1,518)

Net cash used in investing activities

 

 

(483)

 

 

(3,514)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

2,751

 

 

4,202

Excess tax benefits from stock-based compensation

 

 

3,060

 

 

1,602

Net cash provided by financing activities

 

 

5,811

 

 

5,804

 

 

 

 

 

 

 

Effects of exchange rate — changes in cash

 

 

(2,190)

 

 

458

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

21,047

 

 

33,841

Cash and cash equivalents at beginning of period

 

 

297,088

 

 

217,170

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

318,135

 

$

251,011

 

Table IV

CommVault Systems, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)

 

Three Months Ended
June 30,

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP financial measures and reconciliation:

 

 

 

 

 

 

 

 

 

 

 

      GAAP income from operations

$

16,416

 

$

10,013

            Noncash stock-based compensation (1)

 

5,928

 

 

4,451

            FICA and related payroll tax expense
            on stock option exercises and
            vesting on restricted stock awards (2)

 

296

 

 

750

      Non-GAAP income from operations

$

22,640

 

$

15,214

 

 

 

 

 

 

 

 

 

 

 

 

      GAAP net income

$

10,125

 

$

7,039

            Noncash stock-based compensation (1)

 

5,928

 

 

4,451

            FICA and related payroll tax expense
            on stock option exercises and
            vesting on restricted stock awards (2)

 

296

 

 

750

            Non-GAAP provision for income taxes adjustment (3)

 

(1,937)

 

 

(2,414)

      Non-GAAP net income

$

14,412

 

$

9,826

 

 

 

 

 

 

 

 

 

 

 

 

      Diluted weighted average shares outstanding

 

47,582

 

 

47,268

 

 

 

 

 

 

 

 

 

 

 

 

      Non-GAAP diluted net income per share

$

0.30

 

$

0.21

 

Footnotes — Adjustments

(1) Represents noncash stock-based compensation charges associated with stock options and restricted stock units granted as follows:

 

Three Months Ended
June 30,

 

2012

 

2011

Cost of services revenue

$

184

 

$

102

Sales and marketing

 

2,636

 

 

2,093

Research and development

 

624

 

 

475

General and administrative

 

2,484

 

 

1,781

Stock-based compensation expense

$

5,928

 

$

4,451

 

(2) 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.

(3) The provision for income taxes is adjusted to reflect CommVault's estimated non-GAAP effective tax rate of approximately 37% in fiscal 2013 and 36% in fiscal 2012.