• Total Revenue: Increased 16% to $233 million.
• Total ARR: Accelerated 20% to $853 million.
• Subscription ARR: Rose 30% to $687 million.
• SaaS ARR: Jumped 64% to $215 million.
• Free Cash Flow: Grew 34% to $54 million.
• Gross Margin: Improved 20 basis points to 82.2%.
• Operating Expenses: Increased 17% to $143 million.
• Non-GAAP EBIT Margin: 20.5%.
• Cash and Cash Equivalents: $303 million.
• Stock Repurchase: $52 million, representing 97% of free cash flow.
• Q3 Revenue Guidance: Expected to be in the range of $243 million to $247 million.
• Full Year Revenue Guidance: Expected to be in the range of $952 million to $957 million.
• Full Year Free Cash Flow Guidance: Expected to exceed $200 million.

• Warning! GuruFocus has detected 3 Warning Sign with CVLT.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CommVault Systems Inc (NASDAQ:CVLT) reported a 16% increase in total revenue to $233 million, marking the fourth consecutive quarter of double-digit revenue growth.
• Total Annual Recurring Revenue (ARR) accelerated by 20% to $853 million, with Subscription ARR rising 30% to $687 million.
• SaaS ARR jumped 64% to $215 million, now representing 25% of total ARR, indicating strong growth in the SaaS segment.
• Free cash flow grew 34% to $54 million, with 97% of that free cash flow returned through share repurchases, demonstrating strong cash management.
• CommVault Systems Inc (NASDAQ:CVLT) announced new cloud-first technology innovations and partnerships, including Commvault Cloud Rewind, enhancing their competitive edge in cloud recovery solutions.

Negative Points

• Operating expenses increased by 17% to $143 million, reflecting planned investments and increased commissions and bonuses, which could impact profitability.
• Despite strong revenue growth, the non-GAAP EBIT margin was 20.5%, which some analysts consider low for a company approaching $1 billion in revenue.
• The guidance for the second half of the fiscal year appears conservative, with implied net new ARR growth lower than the first half.
• There is ongoing work required to fully integrate recent acquisitions like Clumio, which may take time to contribute significantly to revenue.
• The competitive landscape remains challenging, with some competitors ignoring the on-premise segment, potentially impacting market share gains.

Q & A Highlights

Q: Can you provide more details on the upsell and cross-sell dynamics within the SaaS business? A: Jen DiRico, CFO, explained that the SaaS ARR reached a record $250 million, driven by a 127% net revenue retention rate. This growth is attributed to a combination of one-third cross-sell and two-thirds upsell, with significant traction in Cyber Resilience products and emerging workloads like ThreatWise and Active Directory.

Q: How is the relationship with Dell, particularly regarding the data domain platform, evolving? A: Sanjay Mirchandani, CEO, stated that the partnership with Dell is progressing well, focusing on end-to-end Cyber Resilience. While it's a long-term strategy, they are not providing specific growth numbers related to this partnership at this time.

Q: What is driving the growth in the on-premise subscription business, and how does it compare to competitors? A: Sanjay Mirchandani highlighted that Commvault's hybrid and multi-cloud strategy, offering seamless portability across workloads, is key to their success. They continue to invest in on-premise capabilities, which are growing despite some competitors focusing solely on cloud solutions.

Q: Can you explain the conservative guidance for the second half of the year despite strong first-half results? A: Jen DiRico noted that the guidance reflects a responsible growth strategy, considering a 1% FX benefit in Q2 and maintaining consistency with historical ARR growth averages. The guidance philosophy remains cautious to ensure sustainable growth.

Q: How is the company positioned to benefit from the DORA regulation in EMEA? A: Sanjay Mirchandani mentioned that Commvault has been preparing for DORA by enhancing regulatory and compliance capabilities and partnering with systems integrators and Pure Storage to offer out-of-the-box compliance solutions, which is expected to drive business in Europe.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.