CVLT - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Fiscal Q3 2018 Commvault Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I’d like to introduce your host for today’s conference, Michael Picariello, Director, Investor Relations.

begin. may You

Michael Picariello

Executive morning. fiscal Good on dialing today Chief and in call Officer; Chief Thank Brian and quarter Thanks XXXX our Carolan, Chief President Chairman, third Bob Officer. me Al earnings for Bunte, are Operating you. Financial Hammer, for Officer; call. the With

including in projections to call, at session the future of the I’d Before that made question-and-answer we like begin, financial during the statements include statements forward-looking performance. statements, may everyone and remind this regarding call, including end

to such All of relate and Harbor XXXX in Litigation that to and and of related due are statements expectations. and expectations, Securities general a manufacturing, number or to as of Safe plans, these made and conditions. factors, are inherent our based intentions delays provisions the Actual future of Private Act uncertainties, beliefs, of results on the and the development, regarding sale services, our the economic difficulties, marketing, Reform risks differ pursuant products competitive may software materially current

information a and this and our press the release most Form statement conference responsibility website. other no circumstance. in in Form uncertainties and please and our call our business, Report report any The quarterly Factors risks the SEC our in XX-K and discussion Risk of our contained other filings affecting update see to on cautionary in under contained in the and XX-Q, in in For our in Company recent undertakes these Annual

or functionality, discretion. our well of product as features any and as of sole timing development its at the any addition, In remain release,

also new press wired XXX filing. call, the we been standard also SEC to X, earnings conference as on non-GAAP results. our provide an this is revenue release On furnished the The services today financial earlier and April issued available website. has XXXX. Our press will adopted was the Commvault X-K release on over ASC

all prior statements periods to retrospective the basis been was adjusted with on done over comply have financial and adoption Our a our rules. new

will a conference the growth This the recorded webcast. non-GAAP in turn posted reconciliation webcast An is website. on As now a call website can on between over is our we the the basis release results replay using percentages accompanying call. measures our GAAP and will IV President, and I'll following being to press today of for available found discuss also Bob on are archive be on and the being Hammer. CEO be result, and Table our call new rule. today’s the A comparable

Bob Hammer

and also progress Good Mike. certain morning I our QX of growth, build HyerScale our morning, We good thanks encouraged sequential cash funnel made call. Software. am and third Good FYXX in strategic good our everyone, and fiscal our and results. including Commvault growth launch QX forward the strong key We solid had our thanks Commvault our quarter with increase in Appliance HyperScale versus for good operating on software joining progress billings earnings initiatives flow. by early traction and

positively to ’XX initiatives impact revenues two expect We QX these from revenues.

very revenues. made also services We on good in improvements progress

repurchased During approximately our XX the or X.X we stock. common quarter, million shares of million

financial summarize QX Let me our briefly results.

margin sequentially year-over-year, up EPS were X% and share. year-over-year. was Total per up X% XX% $X.XX were revenues revenues EBIT was Software XX.X%,

of enterprise for billings growth in increase highlights driven by of Here $XXX.X growth achieved software sequential and highlighted quarter. $XX.X professional XX% transactions. cash We growth the in deferred We increase million, XX% XX%, flows services the revenue Operating of with year-over-year. year-over-year some had up are year-over-year in We EMEA. at driven by revenue. saw million XX% were record a saw services revenue by improved solid We good revenue quarterly solid growth much an results.

pricing models, rate, over subscription-based our We our petabytes with is continue is double in which to historical and Cloud, represent growth than software contributing which make approximately the approximately in data the in which revenue. the more our XXX XX% in QX approaching deferred run prior Cloud, revenue, of now had year. progress our good managing to year-to-date progress excellent We Xx

We also HyerScale discuss which Appliance, I successfully will launched later. Commvault

The a We our our fiscal revenue to fourth-quarter are and reduce growth growth focused the on earnings executing improve dependency and large solid to deals. in overall strengthen fiscal foundation rate for is XXXX. for objective

on timing. quarters, their steady figure to we and seven of many flow complexity we six which risk have As are deals, come reliant and due large a discussed additional for currently with

key These pleased Initiatives to intended the and large opening enhancements stream and to penetrate which during closed QX on quarterly that below in to from launched reduce Commvault excellent to growth our channel not and solutions initiatives did platform. enabled close to the in accelerate QX. appliance our deals enterprise revenue much can CommVault enterprises large as were and complement initiatives strengthen very a rates QX a partners mid-market. earlier, stronger initiatives historical our note are levels. mid-market, some close successfully in both get distribution market provide the deals are pushed in potential is the QX. sell in both two The several significant ability I'm expected mid-market and in that those we opportunities the that we we strategic of force up more to sales in quarter, risks. to distribution provide mentioned QX our I data to some and deals HyerScale for launched There our to While which and are designed that make close it from progress QX for QX We to had for and easier leverage, Appliance, enterprise revenues. HyerScale made by are

response channel our We from have and partners good had customers.

number of and impact in in a begin will see an revenues from have hand, ’XX. to We orders appliance QX

Cisco XXXX. our We good saw for enterprise. build in revenues tied the to results with fiscal expect resale appliance will our We agreement meaningfully funnel impact new

is with reminder, the HyperScale solution with Software combined hardware under Cisco ScaleProtect As name. reselling the UCS Commvault UCS Cisco Cisco a

’XX in expect revenue in from QX We meaningfully HyerScale will HyerScale see revenues and an impact FYXX. impact revenues Commvault Commvault to

driving For are focusing in FYXX, on increased significant revenue by improvement and productivity. field operating we margins

to implementing we productivity. go-to-market establishment include and a comprehensive changes in with in addition organization. more specifically launched alliances In They field already that are to our initiatives higher combination are strategy those designed drive of distribution

strategy Owen program creation through and Development to new His global we be business As route a to CommVault we position, Market our scale Worldwide and partner the for drive the this global last will partnerships. announced Partnerships market week, appointed Taraniuk immediately. to and go-to-market appointment focused company's strategic CommVault’s at effective In growth execution and indirect leading of underscores Owen recently initiative Head approach. the responsible

in Secondly, automation new enable to by enhancements we the and on functionality marketing industry-leading user through revenues us core buy accelerating These for efforts platform, product and a focus our which interface, distribution mid-market. to realigned are enabled efforts our network. solutions simplified

acceleration saw our service business. Thirdly, announced our services near of in strategically that continue SaaS Infinidat, and We we through strong managed business we of are strategic are provider managed coverage the our are strengthening customer to key Cisco, alliance HPE high FYXX. we the partners including redeployment be and through and services expect primarily acquisition Fifth, field should that focusing and accelerating Microsoft, impact alliance aligned channel others mid-market future. this are SaaS on resources. and Fourth,

models. will action of continue I move to We will our taking on subscription to market pricing QX accelerate the and recognized now FYXX tied to issues new pricing. some outlook. We mitigate are introduction to our and address the financial

with pleased a recognized to excellent slight stream and earlier, revenue than mentioned dampening progress on subscription-based models. our revenue. I are made originally we is we with effect The had have the faster somewhat As building anticipated in-period software pricing repeatable transition

should XX%. will margin As such revenue pricing QX believe Brian close deals. continued currently which large approximate expand and rates will recent total our EBIT subscription-based approximately reflects on be and this move our software $XXX from to year-over-year million, shortly. anticipated product and lower seven-figure The we revenue QX

platform impact Our solutions will in positively QX. HyerScale and Appliance revenues enhancements

expanding resources take partnerships Commvault reallocated Solutions and development and drive overall ultimately help pipeline resources have to tied full lead been of we our key of to mentioned, advantage Appliance will appliance opportunities. allocation productivity I and existing support improved partner the As HyerScale and and to pipeline to growth. our The revenue

Street margin As current a the revenue also XXXX $XXX million consensus believe approximately fiscal basis would million for approximately result XXX result, of EBIT is reasonable. $XXX that points. expansion of of total we and That in

execute strong are fundamentals ability still face strategic our our has challenges. improved to critical and While we

and their earnings we figure complexity quarterly As inflow These deals upon and additional quarters, risk have revenue deals have currently and large due come with which discussed timing. are many a to seven six steady we of reliant risk. for

also likely close these closure large will lumpy. remain we deals, on deal improve to While our need rates rates

interfaces. products, We are many market to user services bringing powerful new and simplified

new moving new into programs. risk. with are execution do We channel market complex more initiatives, have and requiring series a to This us also of execute is aggressive strategic segments which partners

pricing to models. We new moving are also

the transition some are in has we with our are cost pricing rectifying. happy While subscription-pricing, we making are progress we models market with which confusion,

impacted bookings near-term our has revenues move growth. while negatively subscription the to license deferred and revenue Additionally improving

bootstrap new The This the We has at are effort being productivity. driven and objective time accelerate risks. margins. effort clearly sales products, improve trying is improve with services focused operating a revenues to while timing same distribution to by

to in be order rich] our objectives. [opportunity objectives [objectives], the invest critical an to in jeopardizing achieve technology our to without situation to in balanced software innovation go prudently we however, our and We achieve to need continue earnings our FYXX market, our objectives market ability

Cloud journey So gain with large success mitigate recover primarily on just and solutions CommVault with to share a in attack. the and the cyber FYXX to data based growth from accounts the to enterprise for in customers summary, our continued help is platform

and core additional provider Commvault Secondly, impact with products which have leverage an improved QX QX and in data QX begin our ’XX, and distribution updated solutions, and of to in pricing the strategic new of in protection products will release ’XX half first channel in Appliance HyerScale partners service and services the FYXX, and software FYXX.

operating efforts improve improved. game distribution we protecting at to to moving line, by Bottom in a margins time of accelerate fundamentally lot parts while believe growth summary, In our ability analytics. our driving revenue plan. future boosting there to the our are license same our has leverage We are

across that our line progress into strengthening good will going product are call we Brian. making distribution. In of high I now technology the building revenue summary, we for by are very earnings to foundation company and competitive over our expanding aspects all FYXX growth. position, the good and and are turn broadening well-positioned long-term a We believe

Brian Carolan

prior the now revenue revenue We and morning, were revenue QX representing XXXX. period which software in XX% $XXX.X X% and the X% define fiscal everyone. Bob, $XXX billings, increase change over of XX% as XX% quarter we plus million, year of of reported total third and X% financial cover good and the products sequentially. over million, total the I will sequential up record deferred for year some Thanks, period revenues was million, year-over-year highlights a $XX.X and Quarterly which sequentially. increased an sequentially. prior approximately

We customers. that to Subscription-based pleased revenue and models approximately pricing represented XXXX, subscription in fiscal with shift continued resonating rate. our than are pre-fiscal XXXX year-to-date software is double pricing our run both of more QX XX%

year-over-year transactions encouraged over quarter, these software enterprise deals, we are represented as stream. this was X% from software in up repeatable given by We XX% deals revenue a in define of Revenue the Revenue X% sequentially. revenue growth in revenue. from and $XXX,XXX which

Our increased approximately to average the year-over-year quarter. deal during size $XXX,XXX enterprise X%

the traditional respectively, up Total and Americas respectively X%, services. based a as 'XX. that license revenue anticipate our down of Americas, XX% split QX quarter while our represented licenses mix to XX% in APAC sets XX% traditional quarter. year-over-year basis, perspective, the standalone of increase were decline per XX% XX% revenue XX% license was 'XX This of EMEA pricing a capacity software and revenue APAC EMEA, was platform capacity geographic was revenue XX%, On growth software continue XX%, approximately model. and and sequentially. X%. and for During QX down QX We the quarter X% is revenue of a XX% an in XX% software solution sales approximately to for shifts in services was million, $XX basis. The year-over-year for sold and and in from software will terabyte From

have to rates our improved and maintenance continue QX much professional services delivered business We results. strong renewal

with Operating in million employees. income operating margins, the Gross year-over-year. quarter. expenses up $XX.X were count based $X.XX weighted the fiscal were gross expenses, Net margins quarter employees resulting $XX moving for X,XXX was million or ending million and Now XX.X a QX for EBIT approximately on margins added diluted approximately approximately margin. EBIT the were operating onto We XX.X% for shares. Total for the in net and operating EPS $XXX.X was approximately quarter XX.X% income XX quarter, quarter, share million. the of average of X%

impact Let me and taxes now of briefly recent tax the comment on reform.

For a of income million. driven the report GAAP $XX third will large GAAP The was non-cash by two charges. net we quarter, loss loss tax

a First, tax to which value the reduction corporate we benefits XX%. result assets, are XX% of lowering from rate million deferred $XX future US of with a recorded tax the our as income tax

in impact years. Secondly, no our of necessary tax remaining deferred concluded allowance recent a assets. a of tax valuation on deferred charge losses provision, return allowance was tax as a million the taxes. GAAP cash balance we income $XX has valuation of This or recorded result inclusive pre-tax We incurring a against

fiscal we $X expect cash a primarily taxes. million. income due state fiscal will million, approximately XXXX be still As cash reminder, to related believe and be We XXXX approximately to taxes $X taxes foreign our currently

We profits were that are on US previously still for not one-time the tax income transition the purposes. the impact earnings tax cumulative of of value and repatriated analyzing

have As statements. recorded liability a not the tax financial in QX for this we result, the

QX tax However, date time CommVault lowered based on tax Despite to transition significant. we we the expect tax over accounting cash don't will will reform and one-time these analysis from and completed benefit we believe be to see GAAP rates. charges this

for will tax the of of we a non-GAAP to rate consistency, use XXXX. fiscal XX% of sake remainder the For continue

based on align our US we long should expect reduce anticipated initial we that which However, in cash income reform, term currently fiscal from XX% tax non-GAAP will of modeling new approximately the tax XX% with tax XXXX our our rate rate. to

outlook subscription and our shift now me on for its pricing Let QX our ‘XX. based impact discuss to

to more than This represents pleased rate. stream subscription we XXXX than is which anticipated. double revenue repeatable faster stated, models of our your pre-fiscal previously pricing are shift with XX% As continued approximately now revenue, again software somewhat building run originally

equal is of is there [dampening] transaction. million the approximately a arrangement things that software committed all comparison in of dollars. recognized a to effect like subscription being period a due such like it price slightly our in to few As had fact QX a on for revenue This perceptual reduced

multi-year anticipated agreements revenue in year-over-year we side which growth to is generally billings able in up committed better was are revenue maintenance On subscription our associated included demonstrate the in than XX% positive QX. balance. with The differed

future. have $XX.X be maintenance December disclosed balance approximately As in billable off in sheet was an [indiscernible] The our form represents includes which as the that of unbilled products. will services XX-Q software balance support for which XX, remaining we of quarters and and professional million also XXXX recognizable backlog $XXX,XXX contract

weighted cycle QX in approximately will to Total consensus due to than to million currently software fiscal EBITD to in XX%. would the count EBITD be $XXX For to pricing XXXX of I average employees for factoring expense revenue. growth one period and product implied employer QX approximately XX.X%. subscription current well be approximately fiscal our spending percentage expect repurchases increase expect believe of recent also EBITD be year cash large reach increase We QX, and repeatable rate a total full $XXX estimates million We recent in ’XX. the share the deals. move a QX. our We rate products approximately before will XXXX adversely revenue growth $X.XX flows lower year expansion impact in we full repurchases non-GAAP the to margin believe This will million XX key move should expense now and longer the XX% like and remind in full the we term revenue FY paid million XX That occur on tax large of QX to revenue calendar I our see we in a many subscription note shares. our be street approximately seven revenue Please QX consensus you to After we benefit to will close predictable additional now us in anticipate in based a higher average current fiscal assumes rate share of share be sequential ultimately of expectations our figure about limit year $X.X year. because a year software approximately continue shares. percentage end move creating year-over-year positively that that approximately software to million XX our year-over-year. lower believe to expect approximately cycle in for the rates basis and of recent more and We street U.S. by cycle to impact the share the is anticipated stream margin approximately period address of resulting in Historically, faster XXX $XXX the XX.X% reasonable. is count slightly pricing in increase overtime. This to QX weighted in than the fiscal and will margin million. EPS XXXX subscription result points The recognizable $X.XX. QX transition million by and QX.

clients gross margin expectations points. basis the and by margin points EBITD basis hardware XXX approximately XX anticipated XX approximately operating of Our will HyperScale by our include offering our integrated adversely impact percentage percentage impact to our with margin that Commvault FY’XX

measures are to Although resources. several in we prudent invest existing control expense to we taking costs continue reallocate plan operating and FY’XX in to increased

leverage growth keep software in Our fiscal like our objectives, this to FY’XX. challenging to do that due quarter that not provide objective seasonality. our usually is mind will will most manner would to margin QX operating We impact is in a you in

trend We continue a then and increase year. anticipate expect decline do sequentially revenue over FY’XX that in dollars EBITD FY’XX in EBITD. sequential currently of QX as this to will both We the rest we in anticipate the

moving Now to on flows. cash balance our and sheet

XX term is approximately XX% was December and located short $XXX which investment approximately of our the balance As of million cash U.S. outside

we million QX’XX, stock or per cost an During X.X average common repurchased million and of our $XX XX.XX shares of share. approximately approximately

is program $XXX share directors the to XXXX March so of expiration Our million XX, the that program increase $XXX now share that expire approximately XXX,XXX and senior to of the date to XXXX. will of options therefore have lives directors executives board XX, stock and available. extend Please XX reach will that end the note repurchase and decided approximately repurchase outstanding authorized have certain their before million year existing March

stock from expect will We capital expiration. operations which quarter flow was of prior XX% options million be during $XX.X expenditures which their the cash as to define flow approximately that cash these exercised year-over-year. was all we Free up left

exceed We EBITD. FY’XX non-GAAP cash continue year to flow full expect slightly to free

revenue is As XXXX which of and December XX% approximately of year X% period an XX, over balance our sequentially. million increase prior deferred $XXX was the

deferred revenue revenue. revenue software services is All not of our

sequential QX expect deferred single-digit in to the percentage range. increase low mid revenue We to growth

of As we expect at deferred in the FY’XX double-digits. to a year-over-year result the end mid to low revenue growth be

from my XX or down which prepared quarter year outstanding the is sales concludes up days, days DSO the from from our XX prior day That sequentially. For remarks. days XX was and

will the Bob? over I call Now to turn back Bob.

Bob Hammer

for go The all is improve revenue term term and reiterating best drive are way a is market with our and deployment strategy making efficient growth helped our is operating this early data protection more for that The in existing in Commvault and to redeploying the I’d growth primarily adjustments business. effort core to of solutions software in at we earnings productivity strategy ability be our to significant key growth we functionality and Thank journey HyperScale drive the by will by bootstrap protection short margins. here distribution. our improvements minutes This you, to to by believe the time channels appliance. software whether our is few of are and client accelerate by which increased sales funded a about same significantly market like talking the drive force to industry effort to resources. success spend both us near by Brian. enablers data going automated headline And

success and in private. to has helping both are our broader on context HyperScale, core data upon business solutions. mitigation built and our me appliance Cyber our calls. public our been our Increased core Let earnings on this which strategy used for recovery and broaden major journey tools HyperScale for data and prior with cloud the strategy to and the mid market. threat the in enterprise of they remain our The protection cases both mid for secondary expanded customers and share put the with updated elements store in protection intact market communicated our continuous including enterprise high volume and solutions

expand move SaaS sophisticated foundation management. We business The cloud, into new share operational move better and GDPR. to much journey and for with data remains to tie cyber to attacks side operational to plan address these new big the massive market based to enterprise of like up need of regulations quickly ways for wide merging analytics. we deal and and will governance business open the for enterprise data significant The the services lastly outcomes revenues opportunities larger and also our for The analytics. deals to

and enterprise. in are to helping Commvault with solutions the partnerships HyperScale Additionally, Microsoft our drive Cisco totally and growth

established economics public in and opportunities a emphasis storage makes to the and solutions data it in the balanced market up sophisticated accelerating The cloud, automated protection midmarket both the core primary Infinidat improve near premise HPE. increasing go term establish of and result for have have companies of our While protection our private more clouds. like growth boomerang protection strategic clouds ability effect enterprise drive that market as the like Cisco, the Appliance. then HyperScale more to to not meaningful that our configurations realignment opening deal solutions segments term more we package data changed, simpler are to our productivity. market in data the core are enterprise which and Core recently establishing strategic and and in in to provide similar on the our strategy business licensed And data significantly shift public us lastly, executing the similar near to market revenue need to secondary focus we alliances ones leading in with accelerated easy-to-use increasing for elements easier by protection,

As previously the I APAC element serving a to mentioned much under more earlier, a was credible comprehensive who go strategy market distribution of establishment our of Owen is our Taraniuk global stronger organization VP.

We have been shifting a of resources other cloud in providers. related of the initiatives Americas to business in working our some on cloud primarily and support with HyperScale relationships We're stronger our programs support Microsoft. the distribution major establishing our programic

our also will market in in be QX, ability believe we enterprise of the support these to and 'XX. in The efforts other began accelerated in efforts more growth of can efforts our and partners. go more increase drive risk. forward, We establishing midmarket part to peers channel penetrate efficient focused channel the Going focused core reduce the

talk let's Now, about services.

services is FY'XX area of for Another growth potential our business.

in seeing a bookings. maintenance in services growth turnaround are We seeing not our but importantly business also accelerated only growth we're our of

growth We and SaaS expect improve being growth driven FY'XX. year-on-year business services businesses. to in our this for is professional This

a digital met comment information we about a I'd technology. to significant Now, as market are like transition that trend to from seeing technology

and and the the deal requirement requirement enterprises cloud for both ways transformation transform IT and malware the and new major images need strong of digital engaging deal IT foundation is CommVault functionality CommVault to including CommVault analytics bundled infrastructure attacks, the and only business GDPR reported their platform core business platform on significant new CommVault enhancements software CommVault a for that unique governance hardware a advantage the business We're and of the finding position functionality need able as including using developed foundation capabilities foundation remains in be platform. all capabilities our with as increased move is hybrid automation Simpana data data single to architectures. simplification proving analytic iOT. platform in including wide and to the and cyber the The data digitized to for automated our to increasing with news lastly that for an are In client analytics with data solutions, the to strategic demand technology new trends. has new the customers learning challenges industry based address closing, and the data to like and The and for strategy opportunity solid. machine the enterprise a platform to in for build the market AI. We

We have need to that take the assets advantages to we strategic these opportunities.

to our go and some are more in a maximize productivity of to resources. use We making shareholder field while value improving distribution with efficient market adjustments order

mitigate with and Specifically, we more strategy emphasis to are business increasing data a in our potential business core core with large and software to executing deals term balanced our vulnerability business go by momentum. our protection increased to HyperScale enterprise of market complementing near strategy the in Appliance. The has the

designed through partnerships new enterprise market our leverage. in position, significantly up our business and partners that strengthening key and open and Infinidat. performance field launched initiatives to treating with HPE new improve solutions we In distribution Cisco with by HyperScale are summary, competitive the We and strategic productivity financial our are improve in opportunities Microsoft like FY'XX

objectives will Our objectives solidify achieve now for and our back to to now Michael? is the foundation FY'XX. QX Michael. turn call I the

Michael Picariello

Thanks, the open Bob. for lines questions. Operator, please

Operator

from Certainly. Fishbein line first our BTIG. of comes the Joel question from [Operator Instructions] And

Your now line open. is

Joel Fishbein

I have for for guys. Hi, Brian. one one two and Bob questions,

concerned you call. steps fix the are pushouts. to But Bob in know some addressed execution First, I investors that you to the continue see issues taking are you the

had they're related, and How not do got know execution this You've several fixable American under talking quarters issues sales should lower give competitive we you've that North and close these for that you confidence rate. issues us got about control? -- you're are what

Bob Hammer

Well, distribution things specific of within there's territories. we've taken the certain and action, the areas here. areas One, some of one in leadership, areas two America's

address by sales those to our as the trends in are needed that there address. business So, executing execution we market AMEA specific is issues, the way well. competitive But quite

simplified prefer key the does particularly completely that the in include and and issues. complex move midmarket would where more for cyber need and how governance the cloud. clearly across or that until or solutions manage they solutions enterprise other fortunately, to of out figure a they in Now simplification those addressing that we're is they customers And elements

HyperScale place. Our designed competitive to address and in both in distribution the provide are market appliance to leverage shifts

thing answer combination at the negative from additional growth it's and is So, to we doing you all channel. the get is things we're just not to one. another in to make our successful software those were to back to other of some standalone know the in solutions doing one company positive both, term stuck call it turn to to taking we're And solutions the on easier the on drive our a

in-depth or made with into go you the market years. So, is years GDPR, there's we we put shifts no turnaround new market the can we new our several together Appliance to HyperScale to strategy got our the three simple started to ago. new investments way test, last four software, one back started going answer, ways over our back HyperScale and reason our we in when ways And all major the

through So, now is these in and we're strategically It pretty working executing elements. good shape. across

a a quarter some something are not results and have early it's introduced that hands, a the just this our pretty then of but on got that initiatives little we've of been but bit in they're we're we So, and missing good. technology lot ago these

Joel Fishbein

and commentary, of not it's based where the that away Is lower weaker. getting this other necessarily the are be the competitive you're the issue take some in guides a guess of large close on we getting strong how terms market in that pushouts should your of rates I or? So,

Bob Hammer

slow It's for those on in internally the point guess. just is and depend that. every making near deals the I mean, at I It's term. almost we're bond, one can't of you them is is agonizingly Yes. still the least

think and this to we in want to in I I by a way think things tied be years major in cyber can near going meantime and want want of analytics. three in taking to market the shift improve I company, out couple place believe this and honestly could the But the growth to we another get term this margins we both. do operating accelerate

Joel Fishbein

Brian, quick. real Okay. just for Hey you

can the on you story maybe I of that's over I just the based that a about a I more Obviously good the us and total term because term. think percentage of And XX% be near lot give will think model shift you talk story investors recurring as because the and obviously impact and maybe components much of a the the is the revenue understand recurring mode. revenue But results. helpful. obviously said thing of components that subscription better the product becoming mean could is

Brian Carolan

Yes.

context drive said And we also to mean of helping that's trying I XX% to representing differed. fiscal script. the XXXX. pre growth software what answer what It's So, revenue. of within in the that in it again, now It's just to double was

is it see can which you we up that year-over-year. XX% stated in So, show number up billings growth our

things and working were pleased with of we have up also terms start of orders terms we mentioned also other us in also subscription of level that showing balance So, we that will in some off disclosable unfulfilled for backlog those are the stats of queue. sheet some in and elements these

pleased the think that had out. we all with product both on those we're making I together, subscription and progress new once offerings rolled we're So, the we elements

Bob Hammer

In to addition services just starting service numbers see line. in really which our show you but in don’t our SaaS which that offering is is the show thing Joel up in strong this growth to managed up and

Operator

question our comes And line the you. Blair. from Thank Jason of Ader next from William

line Your is open. now

Jason Ader

lower much in two the rates, for close themes or the that's I've primarily then questions, can hold they it it's ago. one Bob sales assuming quarters several today you any in and are were wanted on sound the maybe shifts. why Bob, for talked two more cycles to, you. off there that. about America extended thank then you talk competitive that AMEA. Yes, I'm Brian. And for subscription so about strength don’t Is point and I'll North about the one like one on just just Brian, to

Bob Hammer

It's note. job. a were By on pre good you to Jason, the way, complement spot-on earnings your

Jason Ader

clock. Broken

Bob Hammer

Well, just you were spot-on think that I note. on

the primarily Americas. So, issue is yes in rate close the

Americas dollar and theme, mean Americas no doesn't multimillion more of going these to of is them One deals. has There a has dollars reasons a QX is is is closing it -- each them this story. this our the kept of a but quarter. them significant amount into prudent for they're but actually a the multimillion our effect in of increased one quite history That's guidance not the in going our been But of because funnel those we good. are have not lot on the bit

funnel closing dragging this So, not at that them and as the through. in there's just ones no just competitive if theme the are

the in at enterprise. think don’t has all changed I landscape competitive the So,

we've not new with of in line but stronger respects fact, with In partnerships. our gotten many our technology some in

Jason Ader

then but confusing early And a adoption you. subscription the I it understand just on I XXX. mix, of because did think you thank an already Okay, Brian, it’s little

really the I weren’t anyway. changed would have you upfront much subscription mix to the because software that recognize So, thought that have

Brian Carolan

Yes, sure.

Jason Ader

software So, a the revenue differed driving why and can just be mechanics through would growth you it walk basis? there growth on like-for-like for dampening greater

Brian Carolan

deal. compare just mean, I you economics Sure. the a pricing subscription when

subscription three On commitment. a we basis, commitment. be it's transaction. a bit there's little to perpetual for haircut a lower, compare going traditional committed So, it a arrangement and subscription that just like-for-like a example, It's on say against let's small year a

been ramp the faster I longer to FY'XX of we good term. as good not we business again think but have is other this expect it's from in going didn’t drive this, it a repeatable subscription into going suggest while to through the renewal thing helping of to news to went up our now years of for three aspects we expected revenue up Now, we're the now in that and differed it's view than start terms revenue, as coming stream, stream quickly annuity fast-forward deals the that

Bob Hammer

we big customers incentive versus for a it's subscription enough move but it of customers small to enough to made our It's Jason to large -- perpetual.

So, I to a want move to subscription. to because give it's customer meaningful that's impression to tiny our

Operator

Securities. our from the Abhey Thank from question Lamba of next you. line comes Mizuho And

line open. is Your now

Abhey Lamba

previous theme what's understand no taking I that top just there's deals answer have slipped. taking Bob, the slipped two as closing on. you. long Why and about it's that's can deals to three it or is about talk going as near more them? in the question thank continuing Yes, our but maybe you if

Bob Hammer

Abhey. naming procurement. think into company operations is companies. going I I One Okay, we're and a discussion mean, not between

some internal and issues that get right has some, it's they And of they're resolved, close kind with dealing It's will until So, went we'll in that through see. the with we're too nothing deal possible this that the it's customer, accountable, just quarter. middle of maybe it.

a major had customer acquisition. Another

it's hold I to It's there's opening theme they that's so and no its just very So, on up. things you it. mean specific, put customer know?

Abhey Lamba

Yes.

Bob Hammer

Yes.

Abhey Lamba

we place. products? it. about time Got for of in have meaningful it should some the products GDPR, terms in And some those of start hearing we've been seeing When and adoption you

Bob Hammer

think in quarter. I the June

Abhey Lamba

lastly, models causing of that. what causing new about just Can And me. that you that fix more for are pricing it. you elaborate it are confusion. doing Got talked and to That's you that what's them

Bob Hammer

the help to walkthrough those we're the a were but went went to went rectifying That the this the ones. key. as than advancing Jason Ader platform. been few pretty on the pricing issues. But confusion We of a we have clearly major and to from Those pricing combination caused people from changes subscription, caused backend more it. we had talking are must He also platform, we frontend some

Operator

Thank John from next Jefferies. DiFucci of you. our line from And question comes the

line Your now is open.

John DiFucci

you the and midmarket Bob, channel. the when little explain a bit you you. Thank can strengthening further about were talking

a field were on resources. Can to little you going more what said that realigning means? give You be detail you us

Bob Hammer

last completely got Well, it clearly Americas. get did the sales need issue. solve but too in we have It's to be, we've to the not where marketing done What and operating they we we to started is we margins quarter high. it

growth you it's there. so and So, need and higher

with much on things and Cisco align stronger thing to reps and put for same field management resources existing partners is same of we moved with and did we to them the we what we're we So, resources with the the doing We we start, Microsoft to with Microsoft. some alliance channel we a the Appliances. moved align did did formed for the

do moves the we're More to going there. to moved So, we terms of existing come Cisco to made, just again for Appliance. things the of resources summarize, and the Microsoft, some other we the in

more make it Additionally, consistent, we better stronger a needed efficient drive capability lot market and a that growth. more midmarket self-sufficient to more in

major growth be channel it channels. in the Because So, but our we midmarket. easier, to And the the leveraged the pulling little we markets teams more play on But to because is sales help key be big so focused reps moves when it's midmarket after at think look to want which very on just we're also making the not takes moving, balanced that's have the do succeed. we're this, still not enterprise. also sales sure the to receptive make our they And depend models, those are while. those sales I making And expensive. enterprise and to a them simpler to can transition you our through driven want is going big products we're more be

John DiFucci

That's one you helpful, for --. guess, other I Bob. question And

Bob Hammer

heading resources it add but it's can we're you way effectively do. versus your we is pull to risky doing better long for do way assets it's right it a what issue share the use the more And holder. it but the so mean, think is I existing to make assets. and and we it's shareholder to the That's I do value of company I'm

John DiFucci

it's the I said Okay, that this material revenue started that and in quarter then on to launch, hear think traction makes really or that true at sense. just have have to good But but assume you're HyperScale that revenue? getting orders if you would to I you in for is didn’t clear. I see and you all yet, be want much

Bob Hammer

but did you March earnings growth -- in to have in the going something. could our we that's I quarter impactful that be June in revenue, Yes, to mean think worse revenue material the expect quarter. The quarter to March last

John DiFucci

quickly talk about Brian. number, foreign extra We of repatriation for? that to have access use use cash at million use it. you XXX be you all to however to, at just cash, you what a number might Okay. you we Brian, able Can didn’t I come of want to you for give think. up And wiggle of the look might a with and if about a mean I

Bob Hammer

of, in Talk there. Yes. mechanics about get

Brian Carolan

Sure.

our we at looking but policy the overseas, costs the to that's laws also think balance current local of permanently is I is both disclosed money move election the countries. look it see XX% is now tax through of at out foreign our that reinvested we're repatriation outside going of you So, sitting to what exercise U.S. however if about cash those

spread So, in foreign might unfavorable we around need to a come U.S. tax tax of favorable go still to the world. terms some XX+ through. complex laws that. More the while on be We're It's reform there it study. maybe that in laws, throughout still countries

Bob Hammer

a we're be don’t And we that we've of of will cash XX our somewhere available. is last much back use I brought think XXX approach We answer across the starting how public. million million got clearly, what since know So, back we quarter. went of

share use of use buyback cash our be that's cash of to primary been for primary has and likely going Our forward.

Operator

Capital next Thank Markets. from you. question the comes And KeyBanc Alex Kurtz our of from line

is line open. now Your

Alex Kurtz

working fiscal new the And if part Do question some really the the up Appliance in 'XX cannibalization in When at fiscal on questions. is I of fiscal some are from for that is fiscal incremental, deals, assumptions, thanks some pricing. The third about Yes, know a could you impact in operating guys. guidance. existing 'XX of the to the subscription, sort thinking assumption of taking then us We're subscription large guys past my have of had launch. as your couple look may Appliance color how 'XX. you more give that you is close was the transition what demand I sort just adoption Bob you for and of marked of you 'XX? of mentioned market see wondering the rates versus transactions the this in deal saw we there

color some on you. So, be those Thank would helpful. items just

Bob Hammer

a cannibalize it. and depth for be Appliance, that on can the chime well cannibalization some there'll similar. appliances other the That for are be of of it's with appliance and mainly will HyperScale and So, new new marking we can virtualization or data right protection cases revenue. target positive. will use net of data of into protection. be of we protection. it is our yes, data cannibalization data will But some go do But what now those will and be because will combination be with our likely of it significant Alex, and breadth be against to FY'XX protection, it Because

our and HyperScale So, Is we're with more I higher scale HyperScale than you appliance getting solutions like lot into would our boxes a just and just much efficient implementation. it's use scale petabyte software with mean is petabyte, and start multiple doing more doing a it Cisco other up opening cannibalization think that the some that and less way. a of combination that versus data big Appliance. be be and I And software in these will it will the new of HyperScale things market into

attack would do an really cyber. do We doing to mitigating software and providing only with also of company in close can't our recently can the others using fast a very do quickly massive we the is servers petabyte that not HyperScale of terms where deal solutions. with combination of recovery that HyperScale, Because that XXXXs XXXs but large it mitigate with in on multi things

So, Brian will take that.

Alex Kurtz

Brian. go Yes, ahead

Brian Carolan

Yes, to Alex.

not want going to that perpetual. want going So, so options, everyone subscription, is to think customers everyone I is want not

models Our market. as do couple as it's a they the way to to I that and confuse And offer a as for the some as great have in doesn't job fit different models is that the got are long think to right we've market. of okay long

not had methodical same we're try for to going it embrace it be going XX% we to it's way. we're term know the never done with subscription. being success messaging hopefully to and and at continuing in a early a I That's hit a increase, some ever but don’t So, what the FY'XX to and it time very it to objectives continue see going subscription to complete We've near our to time. XXX% be do one

Bob Hammer

lot SaaS. really And Deals, service It to results seeing some to be ' XX. and than we some our managed are in we'll give should a more meaningful acceleration good FY'XX color. you try

Alex Kurtz

guys. Okay. All thanks right,

Operator

from line Fargo. our And next you. Thank Aaron question Rakers comes from of the Wells

is Your open. line now

Unidentified Analyst

for right. Aaron. [ph] Okay, is on Joe This Piellucci

so deal in Is sales breakdown there. of the expectations we about XX%, the do growth go changes fourth back if I last your subscription quarter, you versus I at couple a think a kind it there, how to the for some When software growth about look of quarter, versus How talked Just so rates mid-teens delta the drivers we closure going on the about rate. I think to think the going do could. market?

Bob Hammer

understand the -- sure not The what? question. I'm the question is I

Brian Carolan

certainly. Yes,

funnel dampening expect expectations. the That's into the that few a guidance to of of on said effect we are from a million tune near and we again point. As large would kind dollars. QX in term, our got deal are it's the a and our just deals some still but this slight in embedded rates. good still deal upon matter We've QX big relying we subscription of viable. And a so of QX execution closure And a in had QX at call,

So, close rates. and move subscription combination to it's of both the and deal a improved large

Operator

And of comes next Jaffray. the line question Piper our from Thank Andrew you. Nowinski from

Your line open. is now

Andrew Nowinski

two questions. have just I thanks. right, All

about over time So software even which the QX growth haven't any equates to guidance last first, in XX% close QX, sequential to XX in still your in years. licenses doing you for come new

about second, about a FY'XX Amazon we be what quarter? should OEM what lot and talked contribution was QX FY'XX? other but like and in So, in those can being the how this Cisco two in material why the you contributor would contributions from then the Thanks. we think business thinking significantly and And Microsoft a about the partners accelerate

Bob Hammer

growth XX% bit. with sequential we're the Andrew, a struggling

mid sequential single-digits nowhere the near terms We are in you it's Yes, growth. that. getting seeing of something are number, in know where the don’t I that

Andrew Nowinski

wrong Maybe it to doing over last about that guess the anything growth quarter something you colors I the just have you gave in just the on basis months versus had sorry. now. that change March Then revision a do when XX% Okay, from of last when I any what question, talk changed as year-over-year you a three calculation. Was mid-teens guidance? specifically

Bob Hammer

assumptions have large we our and impact down its QX. deal and subscription for tapping Its

Andrew Nowinski

Amazon? and Microsoft then And it. got Okay,

Bob Hammer

Microsoft. go more it's doing don't And with relationship stay structure well. program with efforts tuned Google that that’s we becoming something This Amazon, also doing we et we with impactful communicate appropriate and Microsoft have the programmatic this are well are continues market. are with on is extremely we'll them joint the more No, but And to marketing difference the and yet cetera, we we as very when and that in to things time AWS.

Although, AWS in in programmatic, than Microsoft our is those with cloud it is growth stronger spite still of that efforts.

tuned good got So, we I'd and say in positions of AWS. strong to both those on stay

Operator

comes question the line from And Street. Martinuzzi you. from Thank Lake Eric next our of

line now is Your open.

Eric Martinuzzi

FY'XX? seasonality the of in on change of channel channel Historically, of investment, sales good go fiscal there a and do first marketing on historical given the kind of market to investments with reps year marketing would half investment. to guys question Any be cohorts bit A investment you a pace ramp boarding partners. go that would new to and with programs, of

Bob Hammer

redeployment with to them I'll time this adding of trying do through versus resources exercise that and let appropriate now. we're going Well, are the but we right at

So, what have that's we done. historically

that past in year, this will we're do have channels plus into this we Going it do differently products because enable us the to trying and than differently years. to

the us new partners then. less have directionally to So, to got it channels more do execute will operating and efficiently like and it products us will margins be that to distribution we strategy enable We for now and obviously drive the our got up.

Eric Martinuzzi

I talk HPE it the Obviously, release HPE about with relationship little me. are with you ones, working for a talked partners, you of marquee Microsoft, about but AWS, bit? one then you that --maybe CISCO, you guys a historically. And one the Okay. haven’t was what heard but new press Can that's the talk a was and and lot about

Bob Hammer

was announced HPE. which call but relationship GreenLake just we we've what our with Well, service with businesses our broadened the managed they interrelationship

announcement first the them. is with that So,

We storage in working trend closely focusing more and with they're our of on the or and investing HPE. or particularly major capabilities GreenLake aligns operations market in that like on and it's I a more more automation. the field the where think primary that with services players in we and well indicative secondary services managed are broader And more are in in and either and

Brian Carolan

Both on HyperScale.

Bob Hammer

our So, storage. yes, and HyperScale -- secondary

Eric Martinuzzi

both. have certain on Well, that and storage servers

Bob Hammer

Yes, is that servers our natural like Well, partners for I have HPE software. good saying point. was are partners HyperScale

Eric Martinuzzi

opposed talking are here specifically software just we that form appliance factor. to as factor And Okay. form

Just --.

Bob Hammer

correct. That Correct. is

Eric Martinuzzi

thanks. Okay,

Operator

Summit the And line you. question Srini of our Nandury Thank from next comes from Redstone Partners.

now open. is line Your

Srini Nandury

bumping for growing Micro, you can very at combination All of the versus into your Huawei, question. and you, taking all? CommVault you this thank you guys right, rapidly Bob. my Bob, are newer Super guys Thank about talk them HyperScale, are positioning HPE,

Bob Hammer

Yes, we our see market, program clearly mean make relatively we bump think. them the Appliance. into on market well there. as competitors those that we quickly every got Al let comments I end HyperScale started the some into I And day, of it's market, well. this lower into we before regard fortunately came so they with I'll out

Al Bunte

well. had Yes. it pretty Bob

always have offer said, as What We advantages. they performance seen that and in a and work. out us. is believe pleased more capabilities with were think doesn't to for our simple have our less we're we money. equation we bit competitive our That I he there before little

So, little protection capabilities of we've here. made enhancements simplicity on earlier as battling on It's all around bit focusing solution and said our around a also and messaging, practicality data Bob we focus. are all the on and on our

need "All said here, of as place." we and aggressive channel about We where we keep along again are. a as feeling good equation strategically, Bob in we're being are side into the good we particularly So, get to the

Bob Hammer

with products weakness with it. channel want to So, it but organization products to everybody have started incentives issue we much biggest that's market much the ago, needed we these and designed for big channel. several remind CommVault an aligned are the And when the was they is you put on And has and the Srini that to in that meet stronger were place go years this distribution. that needs more just mark then along the in clear to

you is its established get to those. driving Normally, But had so, the both it's things and that, with stronger -- we've market. and and distribution you first those addressed product. much So, into thing we've just the technology to got do channel not together of technology, put a in parallel organization

Operator

this at answer time. today's you and question a disconnect. now the have questions further participation, call. no great concludes for showing your Everyone I'm session And you Thank in you. Thank This may day.

Commvault Systems (CVLT) 24 Jan 182018 Q3 Earnings call transcript