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Commvault Announces Fiscal 2019 First Quarter Financial Results
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-- Continued strong growth of subscription-based software and products revenue, up 44% Y-o-Y --
-- Improved earnings flowing from Commvault Advance initiatives --
-- Total revenues up 6% year-over-year --

TINTON FALLS, N.J., July 24, 2018 /PRNewswire/ --

Commvault is the global leader in enterprise backup, recovery, archive and the cloud (PRNewsFoto/Commvault) (PRNewsfoto/Commvault)

First Quarter Highlights Include:



First quarter

GAAP Results:



Revenues


$176.2 million

Loss from Operations (EBIT)


$(6.8) million

EBIT Margin


(3.9)%

Diluted Loss Per Share


$(0.19)




Non-GAAP Results:



Income from Operations (EBIT)


$22.8 million

EBIT Margin


12.9%

Diluted Earnings Per Share


$0.36

Commvault [NASDAQ: CVLT] today announced its financial results for the first quarter ended June 30, 2018.

N. Robert Hammer, Commvault's Chairman, President and CEO stated, "Our first quarter highlights included total revenues of $176.2 million, which is an increase of 6% year-over-year, a 44% increase in year-over-year non-GAAP operating income, non-GAAP EPS of $0.36, 10% annual deferred revenue growth, and 24% year-over-year growth in operating cash flow.  We continue to make excellent progress with our subscription-based pricing models, which increased 44% over the prior year.  Our improved earnings were driven by cost efficiencies implemented as part of our Commvault Advance initiatives which include simplification of our business processes with an emphasis on products and packaging, pricing, go to market messaging, partnerships and alliances, and organizational changes within sales and distribution. We believe these strategic transformation initiatives will position us for long-term, sustainable growth, while improving operating performance in the near term."

Total revenues for the first quarter of fiscal 2019 were $176.2 million, an increase of 6% year-over-year, and a decrease of 5% sequentially.  Software and products revenue was $75.1 million, flat year-over-year, and down 10% sequentially.  Services revenue in the quarter was $101.1 million, an increase of 11% year-over-year and flat sequentially.

On a GAAP basis, loss from operations (EBIT) was $6.8 million for the first quarter compared to a loss of $4.4 million in the prior year.  Non-GAAP EBIT was $22.8 million in the quarter compared to $15.9 million in the prior year, an increase of 44%.

For the first quarter of fiscal 2019, Commvault reported a GAAP net loss of $8.6 million, or a $0.19 loss per diluted share.  The first quarter GAAP results in fiscal 2019 included $11.4 million of expenses related to restructuring and a non-routine shareholder matter.  These expenses have been excluded from our non-GAAP results and are further discussed in Table IV.  Non-GAAP net income for the quarter was $17.3 million, or $0.36 per diluted share.

Operating cash flow totaled $24.8 million for the first quarter of fiscal 2019 compared to $19.9 million in the prior year quarter.  Total cash and short-term investments were $461.7 million as of June 30, 2018 compared to $462.4 million as of March 31, 2018.

During the first quarter of fiscal 2019, Commvault repurchased approximately 366,000 shares of its common stock totaling $25.0 million.

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 July 17, 2018, Commvault announced new, simplified product, pricing, and packaging that makes it easier than ever before to buy, implement and sell Commvault solutions. With these changes, Commvault offers converged data management solutions redefining how progressive enterprises of all sizes protect, manage and use their data - now even more simple, scalable, and complete. In addition, Commvault also announced that it broadly expanded its dedication to partners. Through significant commitments to personnel, programs and resources, all of which put partners firmly at the center of Commvault's go-to-market strategy, it creates an even stronger foundation for the mutual success of Commvault and its worldwide partner network.
  • On July 2, 2018, Commvault announced Two Degrees Mobile Limited (2degrees), New Zealand's newest full-service telecommunications provider, extended its engagement with Commvault to include the deployment of Commvault HyperScale™ Software to support the modernization of its data protection and management infrastructure.
  • On June 27, 2018, Commvault announced a new technology partnership with Lucidworks, the leader in AI-powered search and discovery. Through this agreement, the two companies will begin working together to bring new innovations in artificial intelligence (AI) to the rapidly evolving data backup and protection market.
  • On June 26, 2018, Commvault announced a new partnership with IBM, in which IBM Business Resiliency Services will be able to provide a managed service based on Commvault's portfolio of data management and protection software, including the Commvault Data Platform.
  • On June 6, 2018, Commvault and Alibaba Cloud, the cloud computing arm of Alibaba Group, jointly announced a partnership to leverage each other's technology and market advantages to deliver advanced, innovative and scalable hybrid cloud data management solutions to help customers and partners across the globe accelerate digital transformations.
  • On May 23, 2018, Commvault announced continued business expansion by its ecosystem of channel partners worldwide as a result of the implementation of the Commvault Data Platform as the foundation of wider General Data Protection Regulation (GDPR) solutions.
  • On May 22, 2018, Commvault announced expansion of its portfolio with further integrations into Microsoft Office 365 to improve data protection, migration, security, eDiscovery and compliance for its customers. Enterprise IT organizations can now extend their Commvault investments to protect their Office 365 assets.

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.  Commvault has also provided software and products, services and total 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.  Finally, Commvault has provided free cash flow, which Commvault uses to measure the amount of cash flow the business is generating after capital expenditures.  

All of 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.  In fiscal 2019 Commvault also excluded restructuring and costs related to a non-routine shareholder matter 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.  In addition, because of the varying available valuation methodologies, subjective assumptions such as volatility, which are outside of 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, 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.  In fiscal 2019 Commvault also excluded restructuring and costs related to a non-routine shareholder matter from its non-GAAP results.  These expenses are further discussed in Table IV.  In addition, non-GAAP net income and non-GAAP diluted EPS incorporate a non-GAAP effective tax rate of 27% in fiscal 2019 and 37% in fiscal 2018.

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.  Estimated cash taxes for fiscal 2018 were approximately $6 million.  Estimated cash taxes for fiscal 2019 are expected to be $10 million and relate primarily to Commvault's international operations.  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 measured itself to non-GAAP tax rates of 37% in fiscal 2018 and will measure itself to a non-GAAP tax rate of 27% in fiscal 2019.  The reduction in the rate is the result of U.S. corporate tax reform.

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 24, 2018, at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss its financial results.  To access this call, dial 844-742-4247 (domestic) or 661-378-9470 (international).  Investors can also access the webcast by visiting www.commvault.com. The live webcast and replay will be hosted under the "Events" section of the website. An archived webcast of this conference call will also be available following the call.

About Commvault

Commvault is a recognized global leader in enterprise backup, recovery, and data management across any hybrid environment. Commvault's converged data management solution redefines what backup means for the progressive enterprise through solutions that protect, manage and use their most critical asset — their data. Commvault software, solutions and services are available from the company and through a global ecosystem of trusted partners. Commvault employs more than 2,600 highly-skilled individuals across markets worldwide, is publicly traded on NASDAQ (CVLT), and is headquartered in Tinton Falls, New Jersey in the United States. To learn more about Commvault visit www.commvault.com

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 in Form 10-K and "Item 1A. Risk Factors" in our most recent quarter report in 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.  The development and timing of any product release as well as any of its features or functionality remain at our sole discretion.

©1999-2018 Commvault Systems, Inc. All rights reserved. Commvault, Commvault and logo, the "C hexagon" logo, Commvault Systems, Solving Forward, SIM, Singular Information Management, Commvault HyperScale, ScaleProtect, Commvault OnePass, Commvault Galaxy, Unified Data Management, QiNetix, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, IntelliSnap, Recovery Director, CommServe, CommCell, ROMS, APSS, Commvault Edge, Commvault GO, Commvault Advantage, Commvault Complete, Commvault Activate, Commvault Orchestrate, 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 Operations

(In thousands, except per share data)

(Unaudited)




Three Months Ended
June 30,



2018


2017


Revenues:

Software and products

$

75,050


$

74,761

Services

101,127


91,211

Total revenues

176,177


165,972

Cost of revenues:




Software and products

4,120


805

Services

23,486


20,856

Total cost of revenues

27,606


21,661

Gross margin

148,571


144,311

Operating expenses:




Sales and marketing

97,616


99,909

Research and development

24,794


22,545

General and administrative

22,542


23,851

Restructuring

7,895


Depreciation and amortization

2,533


2,367

Total operating expenses

155,380


148,672

Loss from operations

(6,809)


(4,361)

Interest income

891


433

Interest expense


(232)

Equity in income of affiliate


39

Loss before income taxes

(5,918)


(4,121)

Income tax expense (benefit)

2,649


(3,837)

Net loss

$

(8,567)


$

(284)

Net loss per common share:




Basic

$

(0.19)


$

(0.01)

Diluted

$

(0.19)


$

(0.01)

Weighted average common shares outstanding:




Basic

45,450


45,128

Diluted

45,450


45,128

 

 

Table II

Commvault Systems, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)





June 30,


March 31,



2018


2018

ASSETS

Current assets:





Cash and cash equivalents


$

351,912


$

330,784

Short-term investments


109,754


131,637

Trade accounts receivable


151,283


162,119

Other current assets


20,719


22,248

Total current assets


633,668


646,788






Property and equipment, net


128,788


128,612

Deferred commissions cost


32,732


33,092

Other assets


9,272


10,150

Total assets


$

804,460


$

818,642






LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:





Accounts payable


$

361


$

761

Accrued liabilities


79,471


82,299

Deferred revenue


234,106


241,113

Total current liabilities


313,938


324,173






Deferred revenue, less current portion


88,143


84,661

Deferred tax liabilities, net


2,481


2,430

Other liabilities


3,183


3,314






Total stockholders' equity


396,715


404,064

Total liabilities and stockholders' equity


$

804,460


$

818,642

 

 

Table III

Commvault Systems, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)




Three Months Ended June 30,


2018


2017

Cash flows from operating activities




Net loss

$

(8,567)


$

(284)

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




Depreciation and amortization

3,059


2,772

Noncash stock-based compensation

18,004


19,564

Deferred income taxes

(105)


(1,330)

Equity in income of affiliate


(39)

Amortization of deferred commissions cost

4,615


4,601

Changes in operating assets and liabilities:




Trade accounts receivable

8,672


11,097

Other current assets and Other assets

2,919


(9,225)

Deferred commissions cost

(5,042)


(3,610)

Accounts payable

(376)


328

Accrued liabilities

(1,938)


(11,076)

Deferred revenue

3,298


7,418

Other liabilities

231


(283)

Net cash provided by operating activities

24,770


19,933

Cash flows from investing activities




Purchase of short-term investments

(11,252)


(44,072)

Proceeds from maturity of short-term investments

33,135


33,299

Purchase of property and equipment

(3,521)


(1,474)

Net cash provided by (used in) investing activities

18,362


(12,247)

Cash flows from financing activities




Repurchase of common stock

(25,015)


Proceeds from stock-based compensation plans

13,398


5,570

Net cash provided by (used in) financing activities

(11,617)


5,570

Effects of exchange rate — changes in cash

(10,387)


6,775

Net increase in cash and cash equivalents

21,128


20,031

Cash and cash equivalents at beginning of period

330,784


329,491

Cash and cash equivalents at end of period

$

351,912


$

349,522

 

 

Table IV

Commvault Systems, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures and Other Financial Information

(In thousands, except per share data)

(Unaudited)









Three Months Ended June 30,



2018


2017

Non-GAAP financial measures and reconciliation:





GAAP loss from operations


$

(6,809)


$

(4,361)

Noncash stock-based compensation (1)


17,094


19,564

FICA and payroll tax expense related to stock-based compensation (2)


1,083


653

Restructuring (3)


7,895


Non-routine shareholder matters (4)


3,549


Non-GAAP income from operations


$

22,812


$

15,856






GAAP net loss


$

(8,567)


$

(284)

Noncash stock-based compensation (1)


17,094


19,564

FICA and payroll tax expense related to stock-based compensation (2)


1,083


653

Restructuring (3)


7,895


Non-routine shareholder matters (4)


3,549


Equity in loss of affiliate (5)



(39)

Non-GAAP provision for income taxes adjustment (6)


(3,751)


(9,778)

Non-GAAP net income


$

17,303


$

10,116





Diluted weighted average shares outstanding (7)


47,685


47,469

Non-GAAP diluted net income per share


$

0.36


$

0.21






Three Months Ended June 30, 2018



Sequential


Year Over Year

Non-GAAP software and products revenue reconciliation




  GAAP software and products revenue


$

75,050


$

75,050

      Adjustment for currency impact


1,423


(1,204)

Non-GAAP software and products revenue on a constant currency basis (8)


$

76,473


$

73,846






Three Months Ended June 30, 2018



Sequential


Year Over Year

Non-GAAP services revenue reconciliation





  GAAP services revenue


$

101,127


$

101,127

      Adjustment for currency impact


504


(1,833)

Non-GAAP services revenue on a constant currency basis (8)


$

101,631


$

99,294






Three Months Ended June 30, 2018



Sequential


Year Over Year

Non-GAAP total revenue reconciliation





  GAAP total revenues


$

176,177


$

176,177

      Adjustment for currency impact


1,927


(3,037)

Non-GAAP total revenues on a constant currency basis (8)


$

178,104


$

173,140






Three Months Ended
June 30,



2018


2017

Non-GAAP free cash flow reconciliation:





Net cash provided by operating activities


$

24,770


$

19,933

Purchase of property and equipment


(3,521)


(1,474)

Purchases for corporate campus headquarters (9)


1,855


Non-GAAP free cash flow


$

23,104


$

18,459




Three Months Ended June 30, 2018


Americas


EMEA


APAC


Total

Software and Products Revenue

$

42,116


$

22,025


$

10,909


$

75,050

Customer Support Revenue

60,426


20,359


9,621


90,406

Professional Services

5,785


3,226


1,710


10,721

Total Revenue

$

108,327


$

45,610


$

22,240


$

176,177




Three Months Ended June 30, 2017


Americas


EMEA


APAC


Total

Software and Products Revenue

$

40,011


$

23,772


$

10,978


$

74,761

Customer Support Revenue

56,189


17,111


8,590


81,890

Professional Services

4,861


2,545


1,915


9,321

Total Revenue

$

101,061


$

43,428


$

21,483


$

165,972

 

 

Footnotes - Adjustments


(1)

Represents noncash stock-based compensation charges associated with stock options, restricted stock units granted and our Employee Stock Purchase Plan.  Those amounts are represented as follows:





Three Months Ended June 30,




2018


2017


Cost of services revenue


$

756


$

751


Sales and marketing


9,524


9,440


Research and development


2,215


2,070


General and administrative


4,599


7,303


Stock-based compensation expense


$

17,094


$

19,564




In the three months ended June 30, 2018, the table above excludes $910 of stock-based compensation expense related to the Company's restructuring activities described below in footnote 3.



(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)

In fiscal 2019 Commvault initiated a restructuring plan to increase efficiency in its sales, marketing and distribution functions as well as reduce costs across all functional areas.  These restructuring charges relate primarily to severance and related costs associated with headcount reductions.  Restructuring includes $910 of stock-based compensation related to modifications of awards granted to former employees.  Management believes, when used as a supplement to GAAP results, that the exclusion of these charges will better help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.



(4)

During the first quarter of fiscal 2019 Commvault incurred costs related to a non-routine shareholder matter.  The costs are for professional fees related to the settlement agreement with the shareholder and consulting fees incurred with the operational review which was agreed to as part of the settlement.  Management believes, when used as a supplement to GAAP results, that the exclusion of these costs will better help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.



(5)

Represents Commvault's share of income or loss from its investment in Laitek, Inc.



(6)

The provision for income taxes is adjusted to reflect Commvault's estimated non-GAAP effective tax rate of 27% in fiscal 2019 and 37% in fiscal 2018.



(7)

For GAAP purposes the potentially dilutive impact of options and shares associated with our stock-based compensation programs were excluded from the calculation of GAAP loss per share in the periods ended June 30, 2018 and 2017 because they would have been anti-dilutive.  For purposes of non-GAAP income per share the impact of dilutive options and shares has been included.



(8)

Revenues on a constant currency basis are calculated using the average foreign exchange rates from a previous period and applying these rates to foreign-denominated revenues in the corresponding period of fiscal 2019. The difference between revenue calculated based on these foreign exchange rates and revenues calculated in accordance with GAAP is listed as Adjustment for currency impact in the table above.



(9)

In the first quarter of fiscal 2019 Commvault made a purchase of land adjacent to it global corporate headquarters.  Due to the non-routine nature of this transaction, the amount has been adjusted from the calculation of non-GAAP free cash flow.

 

 

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SOURCE Commvault

Investor Relations: Michael Picariello, Commvault, 732-728-5380, ir@commvault.coml Media Relations: Leo Tignini, Commvault, 732-728-5378, ltignini@commvault.com