Commvault Announces Fiscal 2021 First Quarter Financial Results

July 28, 2020 at 7:40 AM EDT
--- Record first quarter software and products revenue, up 20% year over year ---
 
--- Recurring revenue up 24% year over year ---

TINTON FALLS, N.J., July 28, 2020 /PRNewswire/ --

First quarter highlights include:



First quarter

GAAP Results:



Revenues


$173.0 million

Income from Operations (EBIT)


$6.7 million

EBIT Margin


3.9%

Diluted Earnings Per Share


$0.05




Non-GAAP Results:



Income from Operations (EBIT)


$32.5 million

EBIT Margin


18.8%

Diluted Earnings Per Share


$0.51

Commvault (NASDAQ: CVLT) today announced its financial results for the first quarter ended June 30, 2020

"I could not be prouder of the team. Our first quarter results are validation that our streamlined operations and reinvigorated go-to-market engine are starting to execute well," said Sanjay Mirchandani, President and CEO, Commvault. "Together with our new product portfolio and robust partner program, our customers are starting to embrace our intelligent data management vision."      

Total revenues for the first quarter of fiscal 2021 were $173.0 million, an increase of 7% year over year and 5% sequentially.  Total recurring revenue was $141.1 million, an increase of 24% year over year. 

Annualized recurring revenue (ARR), which is the annualized value of all active Commvault recurring revenue streams at the end of the reporting period, was $471.6 million as of June 30, 2020, up 9% from June 30, 2019.

Software and products revenue was $76.6 million, an increase of 20% year over year and 15% sequentially.  The year over year increase in software and products revenue was driven by a 41% increase in larger deals (deals greater than $0.1 million in software and products revenue).  The volume of these transactions was up 5% and the average dollar amount of these transactions increased 35% to $403,000.   

Services revenue in the quarter was $96.4 million, a decrease of 2% both year over year and sequentially.

On a GAAP basis, income from operations was $6.7 million for the first quarter compared to loss of $6.7 million in the prior year.  Non-GAAP EBIT was $32.5 million in the quarter compared to $15.5 million in the prior year.

For the first quarter of fiscal 2021, Commvault reported GAAP net income of $2.3 million, or $0.05 per diluted share. Non-GAAP net income for the quarter was $23.9 million, or $0.51 per diluted share.

Operating cash flow totaled $15.3 million for the first quarter of fiscal 2021 compared to $31.1 million in the prior year quarter.  Total cash and short-term investments were $356.3 million as of June 30, 2020 compared to $339.7 million as of March 31, 2020.

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."

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, non-GAAP diluted earnings per share and annualized recurring revenue (ARR).  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 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 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.

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 as well as restructuring costs.  In fiscal 2020, Commvault also excluded costs related to a non-routine shareholder matter. Commvault has also excluded the noncash amortization of intangible assets and certain costs related to key employees of Hedvig 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.

Amortization of intangible assets is a noncash item.  Commvault believes the exclusion of this amortization expense provides for a useful comparison of operating results to prior periods and to 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 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.  

Commvault's management generally compensates for the 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 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 incorporate 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 EPS.

Conference Call Information

Commvault will host a conference call today, July 28, 2020, 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).  The live webcast can be accessed 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 is the recognized leader in data backup and recovery. 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 2,500 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.

©1999-2020 Commvault Systems, Inc. All rights reserved. Commvault, Commvault and logo, the "C hexagon" logo, Commvault Systems, Commvault HyperScale, ScaleProtect, Commvault OnePass, Unified Data Management, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, IntelliSnap, Recovery Director, CommServe, CommCell, APSS, Commvault Edge, Commvault GO, Commvault Advantage, Commvault Complete, Commvault Activate, Commvault Orchestrate, Commvault Command Center, Hedvig, Universal Data Plane, the "Cube" logo, Metallic, the "M Wave" logo, Be Ready 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,


2020


2019

Revenues:




Software and products

$

76,554



$

63,674


Services

96,446



98,529


Total revenues

173,000



162,203


Cost of revenues:




Software and products

5,847



6,030


Services

18,704



22,690


Total cost of revenues

24,551



28,720


Gross margin

148,449



133,483


Operating expenses:




Sales and marketing

81,676



87,385


Research and development

31,142



23,580


General and administrative

21,559



22,507


Restructuring

2,324



4,079


Depreciation and amortization

5,065



2,606


Total operating expenses

141,766



140,157


Income (loss) from operations

6,683



(6,674)


Interest income

343



1,923


Income (loss) before income taxes

7,026



(4,751)


Income tax expense

4,743



2,095


Net income (loss)

$

2,283



$

(6,846)


Net income (loss) per common share:




Basic

$

0.05



$

(0.15)


Diluted

$

0.05



$

(0.15)


Weighted average common shares outstanding:




Basic

46,191



45,451


Diluted

46,503



45,451


 

 

Table II


Commvault Systems, Inc.


Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)








June 30,


March 31,



2020


2020

ASSETS

Current assets:





Cash and cash equivalents


$

345,432



$

288,082


Restricted cash




8,000


Short-term investments


10,845



43,645


Trade accounts receivable, net


149,778



146,990


Other current assets


27,415



26,969


Total current assets


533,470



513,686







Property and equipment, net


113,657



114,519


Operating lease assets


13,445



15,009


Deferred commissions cost


32,928



31,394


Intangible assets, net


43,525



46,350


Goodwill


112,435



112,435


Other assets


16,377



11,683


Total assets


$

865,837



$

845,076







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:





Accounts payable


$

152



$

307


Accrued liabilities


81,243



87,051


Current portion of operating lease liabilities


7,130



7,699


Deferred revenue


234,287



233,497


Total current liabilities


322,812



328,554







Deferred revenue, less current portion


95,562



92,723


Deferred tax liabilities, net


771



849


Long-term operating lease liabilities


7,785



8,808


Other liabilities


4,672



2,238







Total stockholders' equity


434,235



411,904


Total liabilities and stockholders' equity


$

865,837



$

845,076


 

 

Table III


Commvault Systems, Inc.


Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)




Three Months Ended June 30,


2020


2019

Cash flows from operating activities




Net income (loss)

$

2,283



$

(6,846)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization

5,378



2,918


Noncash stock-based compensation

18,951



14,750


Amortization of deferred commissions cost

4,567



4,503


Impairment of operating lease assets

467



718


Changes in operating assets and liabilities:




Trade accounts receivable

(11,384)



43,165


Operating lease assets and liabilities, net

(520)



848


Other current assets and Other assets

7,289



(5,881)


Deferred commissions cost

(5,646)



(3,369)


Accounts payable

(159)



(1,217)


Accrued liabilities

(7,699)



(10,038)


Deferred revenue

(543)



(7,922)


Other liabilities

2,301



(489)


Net cash provided by operating activities

15,285



31,140


Cash flows from investing activities




Purchase of short-term investments



(32,800)


Proceeds from maturity of short-term investments

32,800



32,813


Purchase of property and equipment

(1,643)



(841)


Net cash provided by (used in) investing activities

31,157



(828)


Cash flows from financing activities




Repurchase of common stock



(40,026)


Proceeds from stock-based compensation plans

231



663


Net cash provided by (used in) financing activities

231



(39,363)


Effects of exchange rate — changes in cash

2,677



1,880


Net increase (decrease) in cash, cash equivalents and restricted cash

49,350



(7,171)


Cash, cash equivalents and restricted cash at beginning of period

296,082



327,992


Cash, cash equivalents and restricted cash at end of period

$

345,432



$

320,821


 

 

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,


2020


2019

Non-GAAP financial measures and reconciliation:




GAAP income (loss) from operations

$

6,683



$

(6,674)


Noncash stock-based compensation (1)

18,894



14,382


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

332



415


Restructuring (3)

2,324



4,079


Non-routine shareholder matters (4)



3,303


Amortization of intangible assets (5)

2,825




Hedvig deferred payments (6)

1,406




Non-GAAP income from operations

$

32,464



$

15,505






GAAP net income (loss)

$

2,283



$

(6,846)


Noncash stock-based compensation (1)

18,894



14,382


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

332



415


Restructuring (3)

2,324



4,079


Non-routine shareholder matters (4)



3,303


Amortization of intangible assets (5)

2,825




Hedvig deferred payments (6)

1,406




Non-GAAP provision for income taxes adjustment (7)

(4,115)



(2,611)


Non-GAAP net income

$

23,949



$

12,722






Diluted weighted average shares outstanding

46,503



46,273


Non-GAAP diluted net income per share

$

0.51



$

0.27













Three Months Ended
June 30,


2020


2019

Subscription and Utility Software and Related Support Services

$

63,619



$

32,289


Recurring Support and Services

77,472



81,845


Total Recurring Revenue

$

141,091



$

114,134


Percentage of Total Revenues

82%



70%






Perpetual Software and Product Revenue

$

25,360



$

40,117


Other Professional Services

6,549



7,952


Total Non-recurring Revenue

$

31,909



$

48,069


Percentage of Total Revenues

18%



30%






Total Revenue (8)

$

173,000



$

162,203


 



Measures at period ending ($000s)



June 30, 2019


March 31, 2020


June 30, 2020

Annualized Repeatable Revenue (9)


$

430,957



$

451,667



$

471,608















 


Three Months Ended June 30, 2020


Americas

EMEA


APJ

Total

Software and Products Revenue

$

50,645


$

18,795


$

7,114


$

76,554

Customer Support Revenue

55,238


23,310


10,095


88,643

Professional Services

4,113


2,555


1,135


7,803

Total Revenue

$

109,996


$

44,660


$

18,344


$

173,000


Three Months Ended June 30, 2019


Americas

EMEA


APJ

Total

Software and Products Revenue

$

31,221


$

21,375


$

11,078


$

63,674

Customer Support Revenue

57,730


21,667


10,085


89,482

Professional Services

4,866


2,682


1,499


9,047

Total Revenue

$

93,817


$

45,724


$

22,662


$

162,203

 

 



Three Months Ended June 30, 2020




Sequential


Year Over Year


Non-GAAP software and products revenue reconciliation






  GAAP software and products revenue


$

76,554



$

76,554



      Adjustment for currency impact


(266)



409



Non-GAAP software and products revenue on a constant currency basis (10)


$

76,288



$

76,963











Three Months Ended June 30, 2020




Sequential


Year Over Year


Non-GAAP services revenue reconciliation






  GAAP services revenue


$

96,446



$

96,446



      Adjustment for currency impact


548



1,193



Non-GAAP services revenue on a constant currency basis (10)


$

96,994



$

97,639











Three Months Ended June 30, 2020




Sequential


Year Over Year


Non-GAAP total revenue reconciliation






  GAAP total revenues


$

173,000



$

173,000



      Adjustment for currency impact


282



1,602



Non-GAAP total revenues on a constant currency basis (10)


$

173,282



$

174,602





















 

 

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,




2020


2019



Cost of services revenue

$

666



$

690




Sales and marketing

7,204



7,646




Research and development

5,941



1,993




General and administrative

5,083



4,053




Stock-based compensation expense

$

18,894



$

14,382





The table above excludes stock-based compensation expense related to the Company's restructuring activities described below in footnote three.



(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, as well as the closure of offices.  Restructuring includes 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 help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.



(4)

During fiscal 2020, 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 noncash amortization of intangible assets.



(6)

In connection with the acquisition of Hedvig Inc., certain Hedvig shareholders will receive cash payments for the 30 months following the date of acquisition, subject to their continued employment with Commvault.  While these payments are proportionate to these shareholders' ownership of Hedvig, under GAAP they are accounted for as compensation expense within Research and development expenses over the course of the 30 month service period.  Management believes, when used as a supplement to GAAP results, that the exclusion of these non-routine expenses will help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.



(7)

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



(8)

This table includes the following financial metrics that are derived from Commvault's GAAP recognized revenue:




Subscription and Utility Software and Related Support Services - The amounts included on this line include a) non-cancellable term-based, or subscription, licenses (inclusive of both recognized software and recognized maintenance and support revenues) that expire at the end of the contractual term; and b) "pay-as-you-go" utility arrangements based on product usage (inclusive of both recognized software and maintenance and support revenues) that are structured with no guaranteed minimums.  The amount includes both Software and Products Revenue and Services Revenue.




Recurring Support and Services - The amounts included on this line consist primarily of maintenance and support revenues associated with the sale of perpetual software arrangements.  This revenue is included in Services Revenue on Commvault's Consolidated Statement of Operations.  




Perpetual Software and Product Revenues - The amounts included on this line are primarily associated with revenue from the sale of perpetual software licenses.  These revenues are included in Software and Products Revenue on Commvault's Consolidated Statement of Operations.  




Other Professional Services - The amounts included on this line are primarily revenues associated with Commvault's installation and consultation services.  These revenues are included in Services Revenue on Commvault's Consolidated Statement of Operations.  




Management believes that reviewing these metrics, in addition to GAAP results, helps investors and financial analysts understand the recurring nature of certain revenue amounts and trends as compared to prior periods. 



 .

Note that nearly all of Commvault's software and product revenue is related to solutions that are run in the customer's environment.  Commvault currently does not have material revenue related to hosted, or software as a solution products.  As a result, as required under ASC 606, substantially all of Commvault's software and product revenue is recognized at a point in time, when it is delivered to the customer, and not ratably over the course of a contractual period.  This is the case for both perpetual software licenses and subscription software licenses



(9)

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 agreements (including utility), maintenance contracts related to perpetual licenses, other extended maintenance contracts (enterprise support), managed services, and Metallic.  It excludes any element of the deal arrangement that is not expected to recur, primarily perpetual licenses and most professional services.  Contracts will be annualized by dividing the total contract value by the number of days in the contract term, then multiplying by 365.




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. 



(10)

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 2021. 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.

 

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SOURCE Commvault

Investor Relations Contact: Michael J. Melnyk, CFA, 732-870-4581, mmelnyk@commvault.com; Media Relations Contact: Miranda Foster, 732-728-5378, mfoster@commvault.com