UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 2, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including zip code)
(732 ) 870-4000
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On May 2, 2023, Commvault issued a press release announcing its results for its fourth fiscal quarter ended March 31, 2023. A copy of the press release is attached hereto as Exhibit 99.1.
This information is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into filings under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
| Exhibit No. | Description | ||||
| Press Release dated May 2, 2023 | |||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in the Inline XBRL document) | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COMMVAULT SYSTEMS, INC.
| Dated: | May 2, 2023 | /s/ Gary Merrill | ||||||
| Gary Merrill Chief Financial Officer (Principal Financial Officer) | ||||||||
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Investor Relations Contact:
Michael J. Melnyk, CFA
732-870-4581
mmelnyk@commvault.com
Commvault Announces Fiscal 2023 Fourth Quarter Financial Results
Fourth quarter and fiscal 2023 highlights include:
Fourth quarter | Fiscal 2023 | |||||||||||||
| GAAP Results: | ||||||||||||||
Revenues | $203.5 million | $784.6 million | ||||||||||||
| Loss from Operations (EBIT) | $(37.7) million | $(15.9) million | ||||||||||||
| EBIT Margin | (18.5)% | (2.0)% | ||||||||||||
| Diluted Loss Per Share | $(0.98) | $(0.80) | ||||||||||||
| Non-GAAP Results: | ||||||||||||||
| Income from Operations (EBIT) | $45.4 million | $159.9 million | ||||||||||||
| EBIT Margin | 22.3% | 20.4% | ||||||||||||
| Diluted Earnings Per Share | $0.73 | $2.56 | ||||||||||||
Tinton Falls, N.J. – May 2, 2023 – Commvault [Nasdaq: CVLT] today announced its financial results for the fourth quarter and fiscal year ended March 31, 2023.
"Commvault closed out the year strong, highlighted by Metallic eclipsing the $100 million ARR mark, 15% year over year total ARR growth, and strong cash flow," said Sanjay Mirchandani, President and CEO. "We enter the new fiscal year with momentum and confidence that Commvault customers are future proofed for the road ahead."
Total revenues for the fourth quarter of fiscal 2023 were $203.5 million, a decrease of 1% year over year. On a year over year constant currency basis, total revenue growth would have been 2%. Total recurring revenue was $173.9 million, flat year over year. On a year over year constant currency basis, total recurring revenue growth would have been 3%. Recurring revenue represented 85% of total revenue.
For the full fiscal year, total revenues were $784.6 million, an increase of 2% from fiscal year 2022. On a year over year constant currency basis, total revenue growth would have been 6%.
Annualized recurring revenue (ARR), which is the annualized value of all active Commvault recurring revenue streams at the end of the reporting period, was $668.4 million as of March 31, 2023, up 15% year over year. On a year over year constant currency basis, ARR growth would have been 17%, driven by continued strength in Metallic as-a-service offerings.
Software and products revenue in the fourth quarter was $90.2 million, a decrease of 10% year over year, with a 12% decrease in larger deals (deals with greater than $0.1 million in software and products revenue). On a year over year constant currency basis, software and products revenue would have declined 8%.
Larger deal transaction revenue represented 72% of our software and products revenue in the three months ended March 31, 2023. There were 187 larger deal transactions in the three months ended March 31, 2023, compared to 226 for the three months ended March 31, 2022. The average dollar amount of larger deal revenue transactions was approximately $347,000 in the fourth quarter of fiscal 2023, representing a 6% increase from the prior year quarter.
Larger deal transaction revenue represented 72% of our software and products revenue in the three months ended March 31, 2023. There were 187 larger deal transactions in the three months ended March 31, 2023, compared to 226 for the three months ended March 31, 2022. The average dollar amount of larger deal revenue transactions was approximately $347,000 in the fourth quarter of fiscal 2023, representing a 6% increase from the prior year quarter.
Software and products revenue for the full fiscal year was $355.1 million, flat from fiscal 2022. On a year over year constant currency basis, software and products revenue growth would have been 4%.
Services revenue in the fourth quarter was $113.2 million, an increase of 7% year over year. For the full fiscal year, services revenue was $429.5 million, an increase of 4% from fiscal 2022. The year over year increases were driven by revenue from Metallic as-a-service offerings. On a year over year constant currency basis, services revenue would have increased 11% for the fourth quarter and 9% for the full fiscal year.
On a GAAP basis, loss from operations (EBIT) was $37.7 million for the fourth quarter compared to income of $11.4 million in the prior year quarter. The year over year decline in GAAP EBIT was primarily attributable to a $53.5 million noncash impairment charge related to the pending sale of Commvault's corporate headquarters. Non-GAAP EBIT was $45.4 million in the quarter compared to $46.6 million in the prior year quarter.
On a GAAP basis, loss from operations (EBIT) for the full fiscal year was $15.9 million compared to income of $41.6 million in the prior year. Non-GAAP EBIT was $159.9 million in fiscal 2023 compared to $161.7 million in the prior year.
Operating cash flow was $67.8 million for the fourth quarter of fiscal 2023 compared to $87.1 million of operating cash flow in the prior year quarter. For the full fiscal year, operating cash flow was $170.3 million, compared to $177.2 million for fiscal year 2022. Deferred revenue growth related to Metallic as-a-service offerings continues to be a driver of cash flow.
During the fourth quarter of fiscal 2023, Commvault repurchased approximately 1.0 million shares of its common stock totaling $60.8 million at an average price of approximately $60.76 per share. During the full fiscal year, Commvault repurchased approximately 2.5 million shares of its common stock totaling $150.9 million at an
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average price of approximately $59.90 per share. Total cash was $287.8 million as of March 31, 2023 compared to $267.5 million as of March 31, 2022. There were no borrowings against the revolving credit facility.
On April 20, 2023, the Board of Directors approved an increase of the share repurchase program so that $250.0 million was available. The Board’s authorization permits Commvault to make purchases of its common stock from time to time in the open market or through privately negotiated transactions, subject to market and other conditions. The Board’s authorization has no expiration date.
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 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, 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 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, noncash amortization of intangible assets, and noncash impairment charges 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.
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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. 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.
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. Further, 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 EPS.
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Conference Call Information
Commvault will host a conference call today, May 2, 2023 at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss quarterly results. The live webcast and call dial-in numbers can be accessed by registering under the "Events" section of Commvault's website. An archived webcast of this conference call will also be available following the call.
About Commvault
Commvault is a global leader in data management. Our Intelligent Data Services help your organization do amazing things with your data by transforming how you protect, store, and use it. We provide a simple and unified Data Management Platform that spans all your data – regardless of where it lives (on-premises, hybrid, or multi-cloud) or how it's structured (legacy applications, databases, VMs, or containers). Commvault solutions are available through any combination of software subscriptions, integrated appliances, partner-managed, or Software as a Service (SaaS) via our Metallic portfolio. Visit www.Commvault.com or follow us @Commvault.
Safe Harbor Statement
This press release may contain forward-looking statements, including statements regarding financial projections, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of software products and related services, general economic conditions, outcome of litigation and others. For a discussion of these and other risks and uncertainties affecting Commvault's business, see "Item IA. Risk Factors" in our annual report on Form 10-K and "Item 1A. Risk Factors" in our most recent quarterly report on Form 10-Q. Statements regarding Commvault’s beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from anticipated results. Commvault does not undertake to update its forward-looking statements.
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Table I
Commvault Systems, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Software and products | $ | 90,232 | $ | 100,489 | $ | 355,082 | $ | 356,487 | |||||||||||||||
| Services | 113,246 | 105,460 | 429,508 | 413,104 | |||||||||||||||||||
| Total revenues | 203,478 | 205,949 | 784,590 | 769,591 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Software and products | 4,376 | 4,586 | 14,684 | 14,057 | |||||||||||||||||||
| Services | 30,429 | 27,461 | 120,718 | 99,802 | |||||||||||||||||||
| Total cost of revenues | 34,805 | 32,047 | 135,402 | 113,859 | |||||||||||||||||||
| Gross margin | 168,673 | 173,902 | 649,188 | 655,732 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 87,222 | 93,138 | 340,783 | 341,644 | |||||||||||||||||||
| Research and development | 32,176 | 40,497 | 141,847 | 153,615 | |||||||||||||||||||
| General and administrative | 27,728 | 22,130 | 104,240 | 103,049 | |||||||||||||||||||
| Restructuring | 4,092 | 4,110 | 15,452 | 6,192 | |||||||||||||||||||
| Depreciation and amortization | 1,639 | 2,582 | 9,270 | 9,666 | |||||||||||||||||||
| Headquarters impairment | 53,481 | — | 53,481 | — | |||||||||||||||||||
| Total operating expenses | 206,338 | 162,457 | 665,073 | 614,166 | |||||||||||||||||||
| Income (loss) from operations | (37,665) | 11,445 | (15,885) | 41,566 | |||||||||||||||||||
| Interest income | 384 | 113 | 1,300 | 656 | |||||||||||||||||||
| Interest expense | (157) | (90) | (472) | (109) | |||||||||||||||||||
| Other income (expense), net | (193) | 737 | (305) | 1,301 | |||||||||||||||||||
| Income (loss) before income taxes | (37,631) | 12,205 | (15,362) | 43,414 | |||||||||||||||||||
| Income tax expense | 5,862 | 4,217 | 20,412 | 9,790 | |||||||||||||||||||
| Net income (loss) | $ | (43,493) | $ | 7,988 | $ | (35,774) | $ | 33,624 | |||||||||||||||
| Net income (loss) per common share: | |||||||||||||||||||||||
| Basic | $ | (0.98) | $ | 0.18 | $ | (0.80) | $ | 0.74 | |||||||||||||||
| Diluted | $ | (0.98) | $ | 0.17 | $ | (0.80) | $ | 0.71 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 44,437 | 44,596 | 44,664 | 45,443 | |||||||||||||||||||
| Diluted | 44,437 | 45,840 | 44,664 | 47,220 | |||||||||||||||||||
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Table II
Commvault Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| March 31, | March 31, | |||||||||||||
| 2023 | 2022 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 287,778 | $ | 267,507 | ||||||||||
| Trade accounts receivable, net | 210,441 | 194,238 | ||||||||||||
| Assets held for sale | 38,680 | — | ||||||||||||
| Other current assets | 14,015 | 22,336 | ||||||||||||
| Total current assets | 550,914 | 484,081 | ||||||||||||
| Property and equipment, net | 8,287 | 106,513 | ||||||||||||
| Operating lease assets | 11,784 | 14,921 | ||||||||||||
| Deferred commissions cost | 59,612 | 52,974 | ||||||||||||
| Intangible assets, net | 2,292 | 3,542 | ||||||||||||
| Goodwill | 127,780 | 127,780 | ||||||||||||
| Other assets | 21,905 | 26,269 | ||||||||||||
| Total assets | $ | 782,574 | $ | 816,080 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 108 | $ | 432 | ||||||||||
| Accrued liabilities | 97,888 | 121,837 | ||||||||||||
| Current portion of operating lease liabilities | 4,518 | 4,778 | ||||||||||||
| Deferred revenue | 307,562 | 267,017 | ||||||||||||
| Total current liabilities | 410,076 | 394,064 | ||||||||||||
| Deferred revenue, less current portion | 174,393 | 150,180 | ||||||||||||
| Deferred tax liabilities, net | 134 | 808 | ||||||||||||
| Long-term operating lease liabilities | 8,260 | 11,270 | ||||||||||||
| Other liabilities | 3,613 | 3,929 | ||||||||||||
| Total stockholders’ equity | 186,098 | 255,829 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 782,574 | $ | 816,080 | ||||||||||
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Table III
Commvault Systems, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||
| Net income (loss) | $ | (43,493) | $ | 7,988 | $ | (35,774) | $ | 33,624 | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 1,667 | 2,923 | 10,323 | 10,950 | |||||||||||||||||||
| Noncash stock-based compensation | 24,679 | 28,370 | 105,746 | 105,163 | |||||||||||||||||||
| Noncash change in fair value of equity securities | 193 | (737) | 305 | (301) | |||||||||||||||||||
| Noncash headquarters impairment | 53,481 | — | 53,481 | — | |||||||||||||||||||
| Deferred income taxes | (674) | 49 | (674) | 49 | |||||||||||||||||||
| Amortization of deferred commissions cost | 6,093 | 4,995 | 22,626 | 18,339 | |||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||
| Trade accounts receivable, net | 6,183 | 5,175 | (11,596) | (20,371) | |||||||||||||||||||
| Operating lease assets and liabilities, net | 5 | (116) | (56) | (925) | |||||||||||||||||||
| Other current assets and Other assets | 3,197 | 5,904 | 6,179 | 3,732 | |||||||||||||||||||
| Deferred commissions cost | (7,866) | (11,660) | (30,529) | (33,512) | |||||||||||||||||||
| Accounts payable | (346) | 180 | (297) | 60 | |||||||||||||||||||
| Accrued liabilities | (7,110) | 13,693 | (24,213) | 10,400 | |||||||||||||||||||
| Deferred revenue | 31,949 | 28,731 | 73,756 | 48,295 | |||||||||||||||||||
| Other liabilities | (125) | 1,621 | 1,011 | 1,677 | |||||||||||||||||||
| Net cash provided by operating activities | 67,833 | 87,116 | 170,288 | 177,180 | |||||||||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||||
| Purchase of property and equipment | (1,055) | (583) | (3,241) | (3,911) | |||||||||||||||||||
| Purchase of equity securities | (84) | (612) | (2,045) | (4,139) | |||||||||||||||||||
| Business combination, net of cash acquired | — | (16,894) | — | (16,894) | |||||||||||||||||||
| Other | — | — | — | 500 | |||||||||||||||||||
| Net cash used in investing activities | (1,139) | (18,089) | (5,286) | (24,444) | |||||||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||
| Repurchase of common stock | (60,790) | (39,825) | (150,921) | (305,239) | |||||||||||||||||||
| Proceeds from stock-based compensation plans | 6,113 | 6,072 | 15,405 | 29,760 | |||||||||||||||||||
| Payment of debt issuance costs | — | — | (63) | (609) | |||||||||||||||||||
| Net cash used in financing activities | (54,677) | (33,753) | (135,579) | (276,088) | |||||||||||||||||||
| Effects of exchange rate — changes in cash | 2,292 | (1,458) | (9,152) | (6,378) | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 14,309 | 33,816 | 20,271 | (129,730) | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 273,469 | 233,691 | 267,507 | 397,237 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 287,778 | $ | 267,507 | $ | 287,778 | $ | 267,507 | |||||||||||||||
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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 March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Non-GAAP financial measures and reconciliation: | |||||||||||||||||||||||
| GAAP income (loss) from operations | $ | (37,665) | $ | 11,445 | $ | (15,885) | $ | 41,566 | |||||||||||||||
| Noncash stock-based compensation (1) | 24,378 | 27,033 | 103,139 | 103,454 | |||||||||||||||||||
| FICA and payroll tax expense related to stock-based compensation (2) | 803 | 991 | 2,465 | 3,261 | |||||||||||||||||||
| Restructuring (3) | 4,092 | 4,110 | 15,452 | 6,192 | |||||||||||||||||||
| Amortization of intangible assets (4) | 312 | 208 | 1,250 | 208 | |||||||||||||||||||
| Headquarters impairment (5) | 53,481 | — | 53,481 | — | |||||||||||||||||||
| Hedvig deferred payments | — | 1,405 | — | 5,622 | |||||||||||||||||||
| Acquisition costs | — | 1,379 | — | 1,379 | |||||||||||||||||||
| Non-GAAP income from operations | $ | 45,401 | $ | 46,571 | $ | 159,902 | $ | 161,682 | |||||||||||||||
| GAAP net income (loss) | $ | (43,493) | $ | 7,988 | $ | (35,774) | $ | 33,624 | |||||||||||||||
| Noncash stock-based compensation (1) | 24,378 | 27,033 | 103,139 | 103,454 | |||||||||||||||||||
| FICA and payroll tax expense related to stock-based compensation (2) | 803 | 991 | 2,465 | 3,261 | |||||||||||||||||||
| Restructuring (3) | 4,092 | 4,110 | 15,452 | 6,192 | |||||||||||||||||||
| Amortization of intangible assets (4) | 312 | 208 | 1,250 | 208 | |||||||||||||||||||
| Headquarters impairment (5) | 53,481 | — | 53,481 | — | |||||||||||||||||||
| Hedvig deferred payments | — | 1,405 | — | 5,622 | |||||||||||||||||||
| Acquisition costs | — | 1,379 | — | 1,379 | |||||||||||||||||||
| Gain on sale of equity method investment | — | — | — | (1,000) | |||||||||||||||||||
| Non-GAAP provision for income taxes adjustment (6) | (6,407) | (8,559) | (22,904) | (34,090) | |||||||||||||||||||
| Non-GAAP net income | $ | 33,166 | $ | 34,555 | $ | 117,109 | $ | 118,650 | |||||||||||||||
| Diluted weighted average shares outstanding | 45,177 | 45,840 | 45,734 | 47,220 | |||||||||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.73 | $ | 0.75 | $ | 2.56 | $ | 2.51 | |||||||||||||||
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| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Subscription software and products revenue | $ | 72,671 | $ | 77,104 | $ | 280,164 | $ | 244,630 | |||||||||||||||
| Perpetual software and products revenue | 17,561 | 23,385 | 74,918 | 111,857 | |||||||||||||||||||
| Total software and products revenue | $ | 90,232 | $ | 100,489 | $ | 355,082 | $ | 356,487 | |||||||||||||||
| Subscription as a % of total software and products revenue | 81% | 77% | 79% | 69% | |||||||||||||||||||
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Subscription software and products revenue | $ | 72,671 | $ | 77,104 | $ | 280,164 | $ | 244,630 | |||||||||||||||
| Recurring support and services revenue | 101,192 | 96,144 | 389,833 | 375,941 | |||||||||||||||||||
| Total recurring revenue | $ | 173,863 | $ | 173,248 | $ | 669,997 | $ | 620,571 | |||||||||||||||
| Percentage of total revenues | 85% | 84% | 85% | 81% | |||||||||||||||||||
| Perpetual software and products revenue | $ | 17,561 | $ | 23,385 | $ | 74,918 | $ | 111,857 | |||||||||||||||
| Non-recurring services revenue | 12,054 | 9,316 | 39,675 | 37,163 | |||||||||||||||||||
| Total non-recurring revenue | $ | 29,615 | $ | 32,701 | $ | 114,593 | $ | 149,020 | |||||||||||||||
| Percentage of total revenues | 15% | 16% | 15% | 19% | |||||||||||||||||||
| Total revenue (7) | $ | 203,478 | $ | 205,949 | $ | 784,590 | $ | 769,591 | |||||||||||||||
| Measures at period ending | ||||||||||||||||||||
| March 31, 2022 | December 31, 2022 | March 31, 2023 | ||||||||||||||||||
| Annualized recurring revenue (8) | $ | 583,254 | $ | 640,731 | $ | 668,411 | ||||||||||||||
| Three Months Ended March 31, 2023 | Year Ended March 31, 2023 | ||||||||||||||||||||||
| Americas | International (9) | Total | Americas | International (9) | Total | ||||||||||||||||||
| Software and products revenue | $ | 55,764 | $ | 34,468 | $ | 90,232 | $ | 214,627 | $ | 140,455 | $ | 355,082 | |||||||||||
| Customer support revenue | 44,855 | 32,480 | 77,335 | 184,568 | 129,745 | 314,313 | |||||||||||||||||
| Other services revenue | 21,718 | 14,193 | 35,911 | 70,049 | 45,146 | 115,195 | |||||||||||||||||
| Total revenue | $ | 122,337 | $ | 81,141 | $ | 203,478 | $ | 469,244 | $ | 315,346 | $ | 784,590 | |||||||||||
| Three Months Ended March 31, 2022 | Year Ended March 31, 2022 | ||||||||||||||||||||||
| Americas | International (9) | Total | Americas | International (9) | Total | ||||||||||||||||||
| Software and products revenue | $ | 61,754 | $ | 38,735 | $ | 100,489 | $ | 215,264 | $ | 141,223 | $ | 356,487 | |||||||||||
| Customer support revenue | 49,623 | 35,063 | 84,686 | 202,867 | 144,248 | 347,115 | |||||||||||||||||
| Other services revenue | 12,441 | 8,333 | 20,774 | 39,764 | 26,225 | 65,989 | |||||||||||||||||
| Total revenue | $ | 123,818 | $ | 82,131 | $ | 205,949 | $ | 457,895 | $ | 311,696 | $ | 769,591 | |||||||||||
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| Three Months Ended March 31, 2023 | Year Ended March 31, 2023 | ||||||||||||||||
| Sequential | Year Over Year | Year Over Year | |||||||||||||||
Non-GAAP software and products revenue reconciliation | |||||||||||||||||
| GAAP software and products revenue | $ | 90,232 | $ | 90,232 | $ | 355,082 | |||||||||||
| Adjustment for currency impact | (742) | 2,343 | 15,079 | ||||||||||||||
Non-GAAP software and products revenue on a constant currency basis (10) | $ | 89,490 | $ | 92,575 | $ | 370,161 | |||||||||||
| Three Months Ended March 31, 2023 | Year Ended March 31, 2023 | ||||||||||||||||
| Sequential | Year Over Year | Year Over Year | |||||||||||||||
Non-GAAP services revenue reconciliation | |||||||||||||||||
| GAAP services revenue | $ | 113,246 | $ | 113,246 | $ | 429,508 | |||||||||||
| Adjustment for currency impact | (1,435) | 3,389 | 19,731 | ||||||||||||||
Non-GAAP services revenue on a constant currency basis (10) | $ | 111,811 | $ | 116,635 | $ | 449,239 | |||||||||||
| Three Months Ended March 31, 2023 | Year Ended March 31, 2023 | ||||||||||||||||
| Sequential | Year Over Year | Year Over Year | |||||||||||||||
Non-GAAP total revenue reconciliation | |||||||||||||||||
| GAAP total revenues | $ | 203,478 | $ | 203,478 | $ | 784,590 | |||||||||||
| Adjustment for currency impact | (2,177) | 5,732 | 34,810 | ||||||||||||||
Non-GAAP total revenues on a constant currency basis (10) | $ | 201,301 | $ | 209,210 | $ | 819,400 | |||||||||||
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Footnotes - Adjustments
(1)Represents noncash stock-based compensation charges associated with restricted stock units granted and our Employee Stock Purchase Plan. Those amounts are represented as follows:
| Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Cost of services revenue | $ | 935 | $ | 1,107 | $ | 4,787 | $ | 4,474 | |||||||||||||||
Sales and marketing | 11,044 | 10,076 | 43,081 | 37,431 | |||||||||||||||||||
Research and development | 5,518 | 9,148 | 28,540 | 33,870 | |||||||||||||||||||
General and administrative | 6,881 | 6,702 | 26,731 | 27,679 | |||||||||||||||||||
Stock-based compensation expense | $ | 24,378 | $ | 27,033 | $ | 103,139 | $ | 103,454 | |||||||||||||||
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)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.
(4)Represents noncash amortization of intangible assets.
(5)Represents noncash impairment charges related to the pending sale of Commvault's owned corporate headquarters.
(6)The provision for income taxes is adjusted to reflect Commvault’s estimated non-GAAP effective tax rate of 27%.
(7)This table includes the following financial metrics that are derived from Commvault’s GAAP recognized revenue:
Subscription software and products revenue - The amounts included on this line include the software and product portion of a) non-cancellable term-based, or subscription, licenses that expire at the end of the contractual term; and b) “pay-as-you-go” utility arrangements based on product usage that are structured with no guaranteed minimums. These revenues are included in software and products revenue on Commvault’s consolidated statement of operations.
Perpetual software and products revenue - 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.
Recurring support and services revenue - The amounts included on this line consist primarily of maintenance and support revenues associated with the sale of both subscription and perpetual software arrangements. This revenue is included in services revenue on Commvault’s consolidated statement of operations. This line also includes revenue from Metallic contracts.
Non-recurring services revenue - 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.
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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. 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. Metallic revenue is recognized over time as services revenue.
(8)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: term-based subscription agreements, SaaS contracts, customer support contracts related to perpetual licenses, enhanced customer support 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. Contracts are annualized by dividing the total contract value by the number of days in the contract term, then multiplying by 365.
ARR should be viewed independently of GAAP revenue, deferred revenue and unbilled revenue and is not intended to be combined with or to replace those items. ARR is not a forecast of future revenue. Management believes that reviewing this metric, in addition to GAAP results, helps investors and financial analysts understand the value of Commvault's recurring revenue streams versus prior periods.
(9)During the fourth quarter of fiscal 2022, Commvault combined the management of its EMEA and APJ field organizations into one International region, which includes Europe, Middle East, Africa, Australia, India, Japan, Southeast Asia and China. The Americas region includes the United States, Canada, and Latin America.
(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 2023. 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 tables above.
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Table V
Commvault Systems, Inc.
Recast Historical Financial Results
(In thousands)
(Unaudited)
Beginning in fiscal 2024, Commvault will transition the reporting of revenues and costs of revenues. The software and services line items on the Statement of Operations, related to revenues and cost of revenues, will be transitioned to the following categories:
Subscription - The amounts on this line include the revenues and costs of recurring time-based arrangements, including the software portion of term-based licenses and software as-a-service (SaaS) offerings. The software component of term-based licenses is typically recognized when the software is delivered or made available for download. For SaaS offerings, revenue is generally recognized ratably over the contract term beginning on the date that the service is made available to the customer.
Perpetual license - The amounts on this line include the revenues and costs from the sale of perpetual software licenses. Perpetual software license revenue is typically recognized when the software is delivered or made available for download.
Customer support - The amounts on this line include customer support revenues and costs associated with our software products. Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support, and other premium support offerings, for both subscription software and perpetual software license arrangements. Customer support revenue is typically recognized ratably over the term of the customer support agreement.
Other services - The amounts included on this line consist primarily of revenues and costs related to professional service offerings, including consultation, assessment and design, installation services, and customer education. Revenues related to other professional services are typically recognized as the services are performed.
Customer support - The amounts on this line include customer support revenues and costs associated with our software products. Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support, and other premium support offerings, for both subscription software and perpetual software license arrangements. Customer support revenue is typically recognized ratably over the term of the customer support agreement.
Other services - The amounts included on this line consist primarily of revenues and costs related to professional service offerings, including consultation, assessment and design, installation services, and customer education. Revenues related to other professional services are typically recognized as the services are performed.
The table below recasts the results for fiscal 2022 and 2023 using the Statement of Operations lines that will be effective beginning fiscal 2024.
| Fiscal 2023 | |||||||||||||||||||||||||||||
| Q1'23 | Q2'23 | Q3'23 | Q4'23 | FY'23 | |||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Subscription | $ | 87,628 | $ | 78,239 | $ | 87,380 | $ | 94,537 | $ | 347,784 | |||||||||||||||||||
| Perpetual license | 17,798 | 19,831 | 19,728 | 17,561 | 74,918 | ||||||||||||||||||||||||
| Customer support | 81,317 | 77,996 | 77,665 | 77,335 | 314,313 | ||||||||||||||||||||||||
| Other services | 11,238 | 11,991 | 10,301 | 14,045 | 47,575 | ||||||||||||||||||||||||
| Total revenues | $ | 197,981 | $ | 188,057 | $ | 195,074 | $ | 203,478 | $ | 784,590 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||||||||
| Subscription | $ | 10,985 | $ | 8,893 | $ | 11,682 | $ | 12,922 | $ | 44,482 | |||||||||||||||||||
| Perpetual license | 626 | 656 | 638 | 519 | 2,439 | ||||||||||||||||||||||||
| Customer support | 15,033 | 15,423 | 14,611 | 13,206 | 58,273 | ||||||||||||||||||||||||
| Other services | 7,113 | 7,330 | 7,607 | 8,158 | 30,208 | ||||||||||||||||||||||||
| Total cost of revenues | $ | 33,757 | $ | 32,302 | $ | 34,538 | $ | 34,805 | $ | 135,402 | |||||||||||||||||||
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| Fiscal 2022 | |||||||||||||||||||||||||||||
| Q1'22 | Q2'22 | Q3'22 | Q4'22 | FY'22 | |||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Subscription | $ | 52,383 | $ | 52,059 | $ | 77,001 | $ | 86,916 | $ | 268,359 | |||||||||||||||||||
| Perpetual license | 32,644 | 27,656 | 28,172 | 23,385 | 111,857 | ||||||||||||||||||||||||
| Customer support | 88,969 | 87,453 | 86,007 | 84,686 | 347,115 | ||||||||||||||||||||||||
| Other services | 9,425 | 10,672 | 11,201 | 10,962 | 42,260 | ||||||||||||||||||||||||
| Total revenues | $ | 183,421 | $ | 177,840 | $ | 202,381 | $ | 205,949 | $ | 769,591 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||||||||
| Subscription | $ | 3,731 | $ | 4,844 | $ | 7,116 | $ | 8,887 | $ | 24,578 | |||||||||||||||||||
| Perpetual license | 946 | 1,450 | 1,123 | 1,044 | 4,563 | ||||||||||||||||||||||||
| Customer support | 13,107 | 12,807 | 14,121 | 14,684 | 54,719 | ||||||||||||||||||||||||
| Other services | 7,491 | 7,473 | 7,603 | 7,432 | 29,999 | ||||||||||||||||||||||||
| Total cost of revenues | $ | 25,275 | $ | 26,574 | $ | 29,963 | $ | 32,047 | $ | 113,859 | |||||||||||||||||||
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