Commvault Announces Fiscal 2024 Third Quarter Financial Results

January 30, 2024 at 7:45 AM EST

TINTON FALLS, N.J., Jan. 30, 2024 /PRNewswire/ -- Commvault [Nasdaq: CVLT] today announced its financial results for the fiscal third quarter ended December 31, 2023

"This was one of the strongest quarters in our history with double digit ARR and revenue growth, and robust free cash flow generation," said Sanjay Mirchandani, President and CEO. "As enterprises face non-stop cyberattacks and threats, the introduction of our new Commvault Cloud platform gives our customers groundbreaking strategies to stay resilient and also positions us for accelerated growth in fiscal year 2025."

Notes are contained on the last page of this Press Release

Fiscal 2024 Third Quarter Highlights -

  • Total revenues were $216.8 million, up 11% year over year
  • Total ARR1 grew to $752 million, up 17% year over year
  • Subscription revenue was $114.2 million, up 31% year over year
  • Subscription ARR1 grew to $571 million, up 29% year over year
  • Income from operations (EBIT) was $21.1 million, an operating margin of 9.7%
  • Non-GAAP EBIT2 was $46.7 million, an operating margin of 21.5%
  • Operating cash flow was $44.4 million, with free cash flow2 of $42.6 million
  • Third quarter share repurchases were $51.3 million, or approximately 711,000 shares of common stock

Financial Outlook for Fourth Quarter and Full Year Fiscal 2024 -

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

  • Total revenues are expected to be between $210 million and $214 million
  • Subscription revenue is expected to be between $111 million and $115 million
  • Non-GAAP operating margin2 is expected to be between 20% to 21%

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

  • Total revenues are expected to be between $826 million and $830 million
  • Total ARR1 is expected to grow 15% year over year
  • Subscription revenue is expected to be between $420 million and $424 million
  • Subscription ARR1 is expected to grow 25% year over year
  • 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 third 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, January 30, 2024 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 the gold standard in cyber resilience, helping more than 100,000 organizations to uncover, take action, and rapidly recover from cyberattacks—keeping data safe and businesses resilient and moving forward. Today, Commvault offers the only cyber resilience platform that combines the best data security and rapid recovery at enterprise scale across any workload, anywhere with advanced AI-driven automation—at the lowest TCO.

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) 


Q3'23


Q4'23


Q1'24


Q2'24


Q3'24

Revenue Summary:










Subscription

$          87,380


$          94,537


$          97,290


$          97,757


$        114,247

Perpetual license

19,728


17,561


13,155


14,388


14,874

Customer support

77,665


77,335


76,915


77,019


76,812

Other services

10,301


14,045


10,790


11,833


10,875

Total revenues

$        195,074


$        203,478


$        198,150


$        200,997


$        216,808



Q3'23


Q4'23


Q1'24


Q2'24


Q3'24

Y/Y Growth:










Subscription

13 %


9 %


11 %


25 %


31 %

Perpetual license

(30) %


(25) %


(26) %


(27) %


(25) %

Customer support

(10) %


(9) %


(5) %


(1) %


(1) %

Other services

(8) %


28 %


(4) %


(1) %


6 %

Total revenues

(4) %


(1) %


— %


7 %


11 %

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

Q3'23 Revenue As Reported (GAAP)

$         87,380


$         19,728


$         77,665


$         10,301


$       195,074

Q3'24 Revenue As Reported (GAAP)

$       114,247


$         14,874


$         76,812


$         10,875


$       216,808

% Change Y/Y (GAAP)

31 %


(25) %


(1) %


6 %


11 %

Constant Currency Impact

$        (1,061)


$           (221)


$        (1,068)


$              (87)


$        (2,437)

% Change Y/Y Constant Currency

30 %


(26) %


(2) %


5 %


10 %

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.


Q3'23


Q4'23


Q1'24


Q2'24


Q3'24


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth


Revenue

Y/Y
Growth

Americas

$  108,107

(9) %


$  122,337

(1) %


$  122,124

— %


$  120,300

4 %


$  125,052

16 %

International

86,967

3 %


81,141

(1) %


76,026

1 %


80,697

12 %


91,756

6 %

Total revenues

$  195,074

(4) %


$  203,478

(1) %


$  198,150

— %


$  200,997

7 %


$  216,808

11 %

Total ARR and Subscription ARR1
($ in thousands)


Q3'23


Q4'23


Q1'24


Q2'24


Q3'24

Total ARR1

$           640,731


$           668,411


$           686,028


$           711,462


$           752,480

Subscription ARR1

$           442,684


$           477,085


$           499,580


$           529,590


$           571,125

Income from Operations (EBIT)

  • Income from operations (EBIT) was $21.1 million, an operating margin of 9.7%
  • Non-GAAP EBIT2 was $46.7 million, an operating margin of 21.5%

GAAP and Non-GAAP Net Income2

  • GAAP net income was $17.1 million, or $0.38 per diluted share
  • Non-GAAP net income2 was $35.0 million, or $0.78 per diluted share

Cash Summary and Share Repurchases

  • Cash flow from operations was $44.4 million in the third quarter
  • As of December 31, 2023, ending cash and cash equivalents was approximately $284.3 million
  • During the third quarter, Commvault repurchased $51.3 million, or approximately 711,000 shares, of common stock at an average share price of approximately $72.13 per share

 

Table I

Commvault Systems, Inc.

 

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



Three Months Ended
December 31,


Nine Months Ended
December 31,


2023


2022


2023


2022

Revenues:








Subscription

$ 114,247


$   87,380


$    309,294


$    253,247

Perpetual license

14,874


19,728


42,417


57,357

Customer support

76,812


77,665


230,746


236,978

Other services

10,875


10,301


33,498


33,530

Total revenues

216,808


195,074


615,955


581,112

Cost of revenues:








Subscription

15,914


11,682


42,920


31,560

Perpetual license

798


638


1,852


1,920

Customer support

15,091


14,611


44,946


45,067

Other services

7,258


7,607


22,746


22,050

Total cost of revenues

39,061


34,538


112,464


100,597

Gross margin

177,747


160,536


503,491


480,515

Operating expenses:








Sales and marketing

91,697


87,343


260,536


253,561

Research and development

34,392


32,505


97,084


109,671

General and administrative

29,098


23,983


84,059


76,512

Restructuring


9,228



11,360

Depreciation and amortization

1,509


2,459


4,647


7,631

Total operating expenses

156,696


155,518


446,326


458,735

Income from operations

21,051


5,018


57,165


21,780

Interest income

1,381


364


3,530


916

Interest expense

(103)


(105)


(311)


(315)

Other income (expense), net

(13)


123


174


(112)

Income before income taxes

22,316


5,400


60,558


22,269

Income tax expense

5,176


5,710


17,772


14,550

Net income (loss)

$   17,140


$       (310)


$      42,786


$         7,719

Net income (loss) per common share:








Basic

$       0.39


$      (0.01)


$           0.97


$           0.17

Diluted

$       0.38


$      (0.01)


$           0.95


$           0.17

Weighted average common shares outstanding:








Basic

43,862


44,712


43,956


44,738

Diluted

44,799


44,712


45,020


45,810

 

Table II

Commvault Systems, Inc.

 

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)




December 31,


March 31,



2023


2023

ASSETS

Current assets:





Cash and cash equivalents


$            284,310


$            287,778

Trade accounts receivable, net


223,710


210,441

Assets held for sale


38,680


38,680

Other current assets


19,834


14,015

Total current assets


566,534


550,914






Property and equipment, net


7,933


8,287

Operating lease assets


11,693


11,784

Deferred commissions cost


61,128


59,612

Intangible assets, net


1,354


2,292

Goodwill


127,780


127,780

Other assets


27,652


21,905

Total assets


$            804,074


$            782,574






LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:





Accounts payable


$                    214


$                    108

Accrued liabilities


101,913


97,888

Current portion of operating lease liabilities


5,178


4,518

Deferred revenue


325,500


307,562

Total current liabilities


432,805


410,076






Deferred revenue, less current portion


184,251


174,393

Deferred tax liabilities, net


736


134

Long-term operating lease liabilities


7,946


8,260

Other liabilities


3,733


3,613






Total stockholders' equity


174,603


186,098

Total liabilities and stockholders' equity


$            804,074


$            782,574

 

Table III

Commvault Systems, Inc.

 

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Three Months Ended
December 31,


Nine Months Ended
December 31,


2023


2022


2023


2022

Cash flows from operating activities








Net income (loss)

$   17,140


$       (310)


$     42,786


$        7,719

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








Depreciation and amortization

1,538


2,801


4,734


8,656

Noncash stock-based compensation

24,602


24,645


71,941


81,067

Noncash change in fair value of equity securities

13


(122)


(174)


112

Amortization of deferred commissions cost

6,795


5,777


19,544


16,533

Changes in operating assets and liabilities:








Trade accounts receivable, net

(28,921)


(33,642)


(20,676)


(17,779)

Operating lease assets and liabilities, net

354


120


419


(61)

Other current assets and Other assets

5,802


3,443


1,970


2,982

Deferred commissions cost

(7,980)


(9,646)


(20,541)


(22,663)

Accounts payable

76


262


108


49

Accrued liabilities

4,815


11,501


852


(17,103)

Deferred revenue

20,697


25,343


22,443


41,807

Other liabilities

(492)


6


407


1,136

Net cash provided by operating activities

44,439


30,178


123,813


102,455

Cash flows from investing activities








Purchase of property and equipment

(1,814)


(805)


(3,227)


(2,186)

Purchase of equity securities

(490)


(168)


(1,062)


(1,961)

Net cash used in investing activities

(2,304)


(973)


(4,289)


(4,147)

Cash flows from financing activities








Repurchase of common stock

(51,298)


(31,344)


(133,655)


(90,131)

Proceeds from stock-based compensation plans

1,385


1,933


7,753


9,292

Payment of debt issuance costs




(63)

Net cash used in financing activities

(49,913)


(29,411)


(125,902)


(80,902)

Effects of exchange rate — changes in cash

8,801


11,190


2,910


(11,444)

Net increase (decrease) in cash and cash equivalents

1,023


10,984


(3,468)


5,962

Cash and cash equivalents at beginning of period

283,287


262,485


287,778


267,507

Cash and cash equivalents at end of period

$ 284,310


$ 273,469


$   284,310


$   273,469

 

Table IV

Commvault Systems, Inc.

 

Reconciliation of GAAP to Non-GAAP Financial Measures

 (In thousands, except per share data)

(Unaudited)



Three Months Ended
December 31,


Nine Months Ended
December 31,


2023


2022


2023


2022

Non-GAAP financial measures and reconciliation:








GAAP income from operations

$   21,051


$     5,018


$   57,165


$   21,780

Noncash stock-based compensation3

24,602


23,626


71,941


78,761

FICA and payroll tax expense related to stock-based compensation4

727


327


2,212


1,662

Restructuring5


9,228



11,360

Amortization of intangible assets6

312


312


938


938

Non-GAAP income from operations

$   46,692


$   38,511


$ 132,256


$ 114,501









GAAP net income (loss)

$   17,140


$       (310)


$   42,786


$     7,719

Noncash stock-based compensation3

24,602


23,626


71,941


78,761

FICA and payroll tax expense related to stock-based compensation4

727


327


2,212


1,662

Restructuring5


9,228



11,360

Amortization of intangible assets6

312


312


938


938

Non-GAAP provision for income taxes adjustment7

(7,772)


(4,791)


(18,853)


(16,497)

Non-GAAP net income

$   35,009


$   28,392


$   99,024


$   83,943









Diluted weighted average shares outstanding

44,799


45,681


45,020


45,810

Non-GAAP diluted earnings per share

$       0.78


$       0.62


$       2.20


$       1.83




Three Months Ended
December 31,


Nine Months Ended
December 31,


2023


2022


2023


2022

Non-GAAP free cash flow reconciliation:








GAAP cash provided by operating activities

$   44,439


$   30,178


$ 123,813


$ 102,455

Purchase of property and equipment

(1,814)


(805)


(3,227)


(2,186)

Non-GAAP free cash flow

$   42,625


$   29,373


$ 120,586


$ 100,269

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 December 31,


Nine Months Ended December 31,


2023


2022


2023


2022

Cost of revenues

$                 1,935


$                 1,383


$               5,224


$               3,852

Sales and marketing

10,189


10,479


29,834


32,037

Research and development

5,451


5,988


16,183


23,022

General and administrative

7,027


5,776


20,700


19,850

Stock-based compensation expense

$               24,602


$               23,626


$             71,941


$             78,761

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 presented on an annualized basis.

  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