CVLT - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Commvault Q2 FY 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to your host, Mike Melnyk, Head of Investor Relations.

begin. may You

Michael Melnyk

morning, our Good year for in dialing earnings Thanks, to and discuss for call fiscal our today results. Kevin. thanks second ‘XX quarter

of are made remind Before that of the services session relate and and to the plans, projections may difficulties materially factors, pursuant uncertainties, provisions of sale general results including beliefs, that current like and Private Harbor begin, and Act Securities statements, and call, call, expectations to competitive to marketing conditions. forward-looking regarding from we economic differ the of the our are I'd the expectations. and the software statements products Litigation Safe delays XXXX due or may and our risks statements statements during as Reform to include inherent question-and-answer future this the including All future everyone based related with the intentions on financial such performance. manufacturing, Actual development,

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

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

our archive an conference over filing. Investor announcement on this the can a issued today's and webcast to An today's be following related between the reconciliation services the is on website. on A as press available available call. will recorded, and Our replay been measures. financial will call, to being is website our non-GAAP we On webcast. be for our GAAP of call found is release non-GAAP to website. also This The and X-K was furnished refer conference this wire release the Relations SEC press available morning has

Carolan, Officer Now with each Chief morning call we Commvault. Financial Chief Sanjay Officer this Mirchandani, me and opening share and and before will of commentary President are on Sanjay Q&A. of for the call the open and Brian remarks Executive Commvault; Brian

turn I'll Sanjay. to over the Now, call

Sanjay Mirchandani

you Difficulty] Mike. us. Good morning, joining for [Technical and Thank thank you,

Operator

Instructions] gentlemen, please [Operator and ladies Again, by. stand

call ladies stay momentarily. conference resume the Your can you the gentlemen, now. This Again, please operator. will is on and hear line. I

Sanjay Mirchandani

What over? So us do I’d -- to point Good is Good again. This results. 'XX discuss and joining QX you morning, have start just me our let morning. just for thank we start Sanjay. to

the is We evolution continue IT increasingly of capitalize where transformation role cloud on ransomware high hybrid the projects. Commvault large important market, remediation to in and playing priority, an

While transformation didn't isolated meet QX principally part softer software of growth are projects. was guidance, that the opportunities larger to our IT revenue impact

sourcing believe issues industry-wide we addition, customer In our are hardware supply components impacting software of and associated chain opportunities.

transformation. While in business this we we highlights our which year-over-year ARR $XXX million. ongoing strength factored to in progress additional Brian call. represents cover the the our long-term reflect grew guidance, a of the Several Total key our into later and will don't executing QX issue, believe conservatism XX%

years. share at subscription represents from this than revenue in new the more QX and $XXX part Importantly, grew year-over-year XX% by of total which more ARR. through SaaS We're to million and highest half growth ARR than level market customers, in now finished as driving evidenced gains,

ARR our growing over and of In Metallic rapidly meaningful contributor in is growth. a SaaS to commercially is total available, our now offering a year being addition, just

indicators. you Now around I'll the on some centered color provide which critical quarter and reasons for additional are optimism, our X

meaningful and business Commvault. ability gain First, inflection market for are new share points our to win

competitive to displacement. was were Metallic more Our of than at the new new in world and of healthcare of transactions and biggest XX% the a one win dollar customers Over organizations a multimillion XX% Commvault. subscription Commvault, this largest transaction logos new quarter, were a for customer

easily is cloud and indication support that more software every the safely AND embracing customers Second, and journeys. are or the power hybrid to SaaS of leveraging

global Salesforce tiers the which for Metallic adding and Commvault Metallic provider that CAGR total the protection as About as And recovery managed years our XXX% services, Last launching only and well leading more week, enterprise Dynamics than multiple security mid-teens trajectories data suite readiness, us than X.; making to With Directory; will a solution grow ransomware IDC involve protection as required third instance, include with to management Cloud, data our data our edge portfolio have managed on Government software for we meet and over space. solution we an we capturing with share to by and providers Metallic this over and the available year-over-year. market offerings several included has expanding over number Metallic, offerings backup internal service. for been achieved SaaS involve offerings, deal billion expanding Active Cloud startups. projects For has and agencies; Metallic. the next an the service stringent service with $XX and milestones, believe XXXX. storage Microsoft as to for a of HyperScale value-added X while expectations a storage Metallic many services in increased products new its transactions own a of continue commercially landed exceeding transaction enterprise-grade that and significant at service X-figure that integrated of date, product first-mover product now for their available workloads just federal to X-figure built already announced and FedRAMP SAP Metallic on containers for availability offer Metallic the a doubling market flexible data to is and more Storage and Sectec, and of a its we're Oracle transactions it with half by GM to year, high security multiple indicator. HANA protocols XXX countries; which growth advantage outpacing High XX brings largest leading

to partners value the drive consumption. cloud brings Commvault see major our Additionally, cloud

that In us fact, backup is a Google co-sell, leading called disaster is validation, the a partner, these Commvault/Metallic partner relationships just Microsoft Microsoft Cloud. ISV and This Azure and a is to beginning. This tremendous on global top recovery and notes mature. continue Google

combine power As critical. customers need ability of SaaS competitive which they is best the We cloud, software is and solutions, AND the the by is will our advantage. transition and or to of so hyper to flexible this both believe scalable the

been data management and and impair and market and recovery. with company's including ecosystems, designed multiple operate in we market, risks Rapid hybrid growing can a of trends, objectives. align operating a and Finally, large environments to that growth ransomware applications introduces growth across portfolio data our has generations

these For help example, Commvault, from in customers At recover ransomware. we industry business today, is every the every regularly of threat facing real attacks. very

last in servers, Just healthcare VM their acclaimed information. environment month, and that X nationally entire application the a down of hit hundreds petabytes was U.S. of leader attack by including dropped an

able defenses back Simply an operation Our with And team, protection software intact. they put, ensured were full XX against get our customer backup. immutable the one the of backup hours. with to industry-leading best help of remained is support to ransomware within data the

data This while than Additionally, help of the making our ransomware the will taking an given Response mixed, one a their multi-cloud solve preponderance complement of is in we is Commvault as including by backup strategies, of organizations And the the organization strength to confident right their data of capabilities results Goodwin Commvault Protection note. we're public Ransomware QX industry strategy customers. service for demonstrated positioned progress were management use that the and cloud, hybrid protection our In Services needs, and customers real just give edge. Phil IDC multipronged I'm term, new I more to protection. summary, commented, is that approach cloud shared. of to underlying data long have and XX%

We cloud customers believe position journeys. meet are we're more a our Metallic in of share, that changing with with market needs portfolio, prime as capturing they we the expanding to navigate their and comprehensive footprint

over it the Brian? for I'll Now, look Brian closer a turn to financials. at

Brian Carolan

Thanks, morning. results morning, review good a Hopefully, Sanjay, to released you had and this chance everyone. the we

some of In QX million of we briefly color fiscal an 'XX, reported revenue recap Now, provide X% $XXX year-over-year. quarter. additional increase will I on versus the total and

Software and products increased revenue X% year-over-year approximately $XX to million.

we've increased of software average revenue. size a model. to in year-over-year, software-only moved hardware In would software-only and a grew XX% X% was transactions these year-over-year. deal As without the FY approximately over represented approximately been Revenue $XXX,XXX. from volume 'XX, X% of X% year-over-year The growth and QX, reminder, have transactions software $XXX,XXX

million. second increased The in quarter being quarter-over-quarter new revenue finished approximately driven and year-over-year doubled in to X% by $XXX business years. Metallic. from revenue at several services Software revenue primarily services Fiscal is the highest growth level approximately

transition our model. to discuss recurring now a revenue-based me Let

quarter revenue and million. led increased in revenue, an by $XXX ago. licenses year-over-year approximately subscription or represented million Total Second a increase increased annual to software Metallic. year XX% subscription of Subscription growth $XX year-over-year revenue, approximately recurring XX% XX% ARR, total to XX% new from customers software

of future now is proof company. business. represents year-over-year. at an the underlying ARR subscription strength It over of for growing and ARR motions of of renewal This was maintenance noted, QX best Sanjay As XX% and is our is software services growth of our XX% $XXX health platform. and We 'XX. point Metallic is of recurring SaaS, the and important and transformation million in a ARR of million, This measure represents quarter. barometer the XX% total of believe the support Total our includes the the and revenue compares representing XX% revenue, total in our potential in to land, SaaS of subscription software, which expand $XXX

operating as expenses, up and X% $XXX million, approximately investments margin Now, offset million. hardware was expenses with which quarter Non-GAAP sales EBIT year-over-year pass-through, points of the growth the infrastructure. margins revenue, Metallic, royalties XX by driven margins the cost legacy in of year-over-year. both $XX These partially basis higher an products. carries to year-over-year reported profitability. an sales, gross increased of non-GAAP campaign, was by the a headcount decrease we EBIT our approximately a of targeted scale was of mix fiscal including version The Expense additions. second XX.X%. savings in of cost points basis strategic and expansion I'll Total especially to gross XX We increase HyperScale and of increased Metallic were ransomware and result discuss improved of and expenses, XX%, associated

I'll and balance discuss sheet. flows the Now, cash

$XX ended increase deferred million of revenue quarter, million, approximately no XX% Deferred was revenue the approximately cash, have we with $XXX $XXX an was sheet. debt in cash and generated primarily balance flow. in Metallic. We driven on Growth For the of we free quarter year-over-year. million the by

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

investor 'XX, approximately event our September during outlined in XX, event plus we of FY have we through on share repurchased fiscal XX% 'XX and January, X.X to million committed the are flow spend As $XXX shares repurchases. cash $XXX million million. for through we investor free Since

outlook I'll Now, financial FY our for 'XX. discuss QX

For software $XX million. QX, expect approximately revenue we of

As competitive including new to Sanjay business, displacements. close, if take we're part winning may of projects. longer IT new This especially discussed transformation earlier, business larger

are conservatively In addition, orders. hardware delayed more software modeling customers' any for to we transactions tied

remind For purposes, to like approximates revenue you that historically modeling QX QX software levels. I'd

We revenue of million. approximately total $XXX expect QX

to expenses. shift let's Now,

or We expect QX approximately to levels QX be to XX%. XX% margins to gross similar

XX%. of sales to expenses, result expenses, approximately approximately This be We EBIT to of margins operating cost should up including total in year-over-year. XX% X% expect and

million share Sanjay? turn some count back projected With now Sanjay for for remarks. to that, approximately closing XX Our call is I QX the shares. will

Sanjay Mirchandani

you, Thank Brian.

the continuing I so, taking on consistent to data; that customers, things help new do and deliver from in earlier, amazing we're to with return focused making customers our year. share the And achieved results progress. we've over solutions in to As intend remain we and doing attracting predictable mentioned competitors and QX, past

call the to up open Operator? Q&A. I'll Now,

Operator

[Operator Instructions].

first Jason comes Blair. Ader with from question Our William

Jason Ader

year Analyst guess, guess, to question, first -- was XXXX Day. update exactly forget I the I there I it your, is any on X what

of any there? CAGR growth. XX% Is I think X% a there was it to update

Brian Carolan

growth just percent that ahead back that that a since QX, targets investor any revenue at look of implies since software mid-single-digit It's to XX-plus you out. remind very event. Good time. well QX We're the and that is the Also our if guidance that well I'll double-digit ARR growth and Brian morning, this assuming investor here. we updating you, target of total laid tracking and Jason. event though, not

by point, this we targets, at and X standing So we we're any put those updating top are not CAGRs that out. still

Jason Ader

should you're the same. the And you you. saying if Got I for QX, heard software right, be about product

Brian Carolan

historically. QX approximates usually yes, -- Usually

Jason Ader

to that to what you. you Do continue line? Got the And about expect grow services sequentially?

Brian Carolan

That will Metallic. by grow sequentially driven

Jason Ader

Okay.

just So bigger you, question just maybe, here. for Sanjay, of a kind picture

cloud good with the about Metallic. you've data of the we some specifically ransomware, in tailwinds seen backup, protection market, some As think traction

expanding You're and your engagement. channel your salesforce

it compute doesn't have You a type a growing guess this I that little quarter mix -- of softer, it after would think a even was you I too. of and just renewals. have seem QX, to which

taken something going trying So has really seems business. understand I'm a here, step like what's the on in to down

Sanjay Mirchandani

new a thing was most line. short we land transforming those and taking The IT on well, you if close important business called go mixed was And to tracking line the you the working We've customers softer want business, anticipated. we're like to to That okay? business. been large that than that this came -- it little -- Jason, part of longer of really cloud, Well, of to revenue and part of the quarter, The is are that. key start they We're of be is out, significantly projects. the indicators land transformation the to new winning sort the business you and customers. we when health a way is, the on we

associated And So, delays little a of hardware some cycles seen secondarily, we've with closing bit of projects. where chain, are of recalibrating sort there supply in the internally. transformation, sort there's

ago. calling back were we've with it. on me in the reinforce. But feel about quarter we conservatism We're a fundamentally we're So We good It's let strong. that. There's And some We're where in business. seen getting recalibrating. focused to nothing changed QX.

Jason Ader

ability half? a as in have in Yes. here has from market very players, standpoint, every been I you that devil's and day. execute landscape a Do just competition though, the aggressive. lot deal particular, a of in you lot guys your advocate there well the the competitive first know, of who you is impacted There's private mean, think to with

Sanjay Mirchandani

AND, we're very now externally changed. is our strategy the very customers that well. in We've actually internally resonating been and and If offering I anything, we always Nothing -- has market. what a Jason, say, what competitive would be We'll call our with power compromise and of them X looking combined of allows for. ability of technology make the what in their capabilities selection cloud is on-premise them they're cloud no give world-class our Metallic HyperScale exactly to This sort our through journeys. to a

business. examples think against we're -- a prepared winning of I some comments gave my we're think you I lot winning new competition. I actually, in about

time. our I'd Our are we business displacements. say, a these real things, closed big good X/X was -- the last business of biggest, number, competitive take quarter these I mean, and

So we They're supply and downstream we're good where actually little feeling got and pretty to taking our stuff, chain we've are. a you combine recalibrate closings. just some with longer,

Operator

Rakers from comes question next Aaron Our Wells with Fargo.

Aaron Rakers

couple well. got as a I Yes.

First of a on all, basis. just housekeeping

metrics you are XXX then talk little cycle it Can last was last net subscription the I executing I renewal subscription for think what think, is million. curious gave at and you dollar some a ARR me was just there SaaS I bit And quarter, retention guys missed on a on if were giving, appreciate I that which help about the was that it. subscription. I if offerings also quarter? around, you apologize metric still

Brian Carolan

Good here. Aaron, morning, Sure. Brian it's

there's been that historically. in variation meaningful said retention net So have no the rate dollar we

that growth SaaS And it call time, XX% think been is than we basis over on we're with go business past majority happened so -- look this quarter-to-quarter, then that ARR, we meaningful we've X-quarter more forecasting a our high I no our XX%, at rolling growing pleased out and as will the didn't and to become opposed that's It this there's but as we and why this point been subscription at and has greater in is now really specifically, per that along represents quarter. year. some overtake and of at variation.

Aaron Rakers

Yes.

Okay. kind it, done in I past that I taking, the look higher revenue, at software was looking next if And given of been that $XX assumption that quarter, mid-teens for growth at abate above factored curious, you've last about helpful. that's past has growth. in sequential saw I'm trying sequential think than the of that If think, that I of last the the look I'm just the over years, this reflect -- this software your you December quarter. more the is level quarter gauge I variables sequential XX% typical mid, guide? Under on few conservatism seasonal and know but issues average I growth roughly in back growth. slightly guidance of quarters, million some component the that's constraints this into maybe that's it the to

Brian Carolan

Yes.

So Aaron. this in confident we're mean, a I couple guide. of things there,

renewal much the in QX. larger fiscal half starting Our in year. second opportunity the That's is of fiscal

versus Our pipeline We're see The new is focused business. we on it's up way it today, healthy. QX.

tremendous transformation have modeling the a cycles there. things amount we are a bit the conservatively. little I projects. get And longer IT larger closing quarter. We we as starting into to that into more of control can't see we're going out delays mean, momentum But hardware we're

delays could be guide. be trying customer conservative and more potential there in So a deals, we're little with some just bit to the

Aaron Rakers

in quarter. the question. versus between projects large then you September this constraints? think the it I'll floor. endorsed million reported quarter, that And the delays Relative The the then real was that results, last IT from final component relative would delta to to leave $XXX how in quick I you And the expectation there, bracket

Sanjay Mirchandani

overlap. there's Aaron,

But things interrelated. things IT move new in stack. very They're they hard you the -- no involved a to move It's of nicely. to cloud, customer large apart. will peel large a nicely. say look part hardware when at them I involved, if entire And pretty if there's that. hardware it's you're there's There's If and transformation, a

Operator

with James comes Fish from next Sandler. Our Piper question

James Fish

Just understanding is And and it roughly the or were more primarily last when more the building timing and you of guide, was your new revenue off delayed? could a Aaron's how that was $X business? U.S.? delays EMEA miss in really in strong quantify back looks of in much million, $X there APAC it of any felt it it million these bookings question, to actually sense was the but why have really way like than versus that guys any than come delays Meaning, and

Brian Carolan

are always to How delays. going always you? Brian you're do that from So spill believe Carolan deals be and James, here. So to there's it's quarter-to-quarter, -- we have it's We going delays.

some business have closed We already. of that

to continue we close to will more or conservative into guidance We any hardware pushout quarter. new of the with it that factored we're And again, delays throughout IT projects transformation quarter. involved this related getting any our kind

James Fish

Right. can primarily was -- in the issues? for it is U.S. me -- EMEA why the why APAC understand these But there and opposed I mean, felt to as help you

Brian Carolan

there. theme no There's common

James Fish

ARR contribute I the look, customer customer and still new XX% guys up were did was adds there. this net strong new -- -- leave seems wins. And new And you some gave the this know was it you to Okay. just discussed quarter Q. software what revenue? What in As discussing it guys customers I'll quarter?

Brian Carolan

Yes.

net Metallic quarter. Metallic, disclose tell is added don't another We XXX over I the AND customers Commvault through customer XX% revenue customers we Metallic resonating. customers those So power well of new solution. have X,XXX total subscription in the now you that for new. exactly is, in the XX% but We over customers we of really and new the broke added XXX quarter. were our of what will About

believe in we're strategy, Metallic to to our customers, Metallic results. and traction and we're So form the and showing here. is We that's lot of up a subscription continue of our ARR trying to drive complementary getting

Operator

from with question Jack comes Needham. Next Andrews

Jack Andrews

a can these to could of opportunities wondering if maybe that little sort industry down point specific any themes you bit. projects, that larger whether some just Are common IT in that I business? you’ve impacted transformation commonalities partners was Are verticals? drill you there specific your there have it's or noticed

Sanjay Mirchandani

into of a to we're part of stack. What call some reevaluate us pane to as digital seeing public you We're we're to win from single And we seeing Sanjay. do the because something moving as it's when that it over -- kind Jack, application that they that, cloud from when of have cloud. anything the new that a allows model, hybrid tend and customers. that the or very as entire customers on-premise glass goes is customers transformation

Sometimes, out it data into its the starts HyperScale with way to starts times, Metallic, it center. that. total with extends moves Other and X

And And they cloud it's with -- digital have They large times these you large the sure have to scenarios complex. do see been little sort ransomware patterns, that the a to transformation other customers And this And the newer in pattern saw and are longer. larger. well more cloud. they tend quarters. customers. ransomware take haven't sort They dependency all remediation protection, is protected tend that sometimes ripped pipeline, of the that's incumbents tends involving to DR that and said, we seen tend in involves there's making be we're against big times, we of seeing hardware, to redoing doing their as that type a if ransomware. to prior projects, then we be The on-premise. and Other several that it seeing continue we're When of -- X that, it's as and out.

So industries. that's saying. we're across what It's

largest I customer in health care a business case quarter back piece of The large the as getting pharmaceutical a customer Just our was was in we used very did a the on point, large last example very also in the industry. company.

I'm -- large by I they there's it giving examples that a And it's -- customers. say would a region. mix. It's varies are mix, you large and So very

Jack Andrews

Sure. I color the that. appreciate around

question. follow-up a as Just

here tied transformation renewal into whether IT you fiscal your in? engaging that to customers some sense as of year, your a second similar the is half about are have do think opportunity in of we the projects As existing that

Brian Carolan

It's probably less, a little a opportunity. Jack. it's mean, renewal I

positive some a as and to and retention view an that, other conversation customer. dollar about opportunity net We that not should about of into larger, although be us our it theory, in can is have into with talk a talk offerings. rate our it we that in for is go that there tied factors So the a Metallic

So view opportunity. an as we that

Operator

Next Lake from Capital. Street [Max question comes Michaelis] with

Unidentified Analyst

in the projects the large issues At transformation what I delays? on just chain begin QX supply you want experience IT did again. to guys see touch to point

Sanjay Mirchandani

At QX? where honestly way which the it leading earlier, X in beyond seeing I I'd say, was it started point into it quarter into -- month the we'd the is we wish seen but really and of it. came about.

So...

Unidentified Analyst

Okay. And then do follow-ups that. Commvault issues I or then believe component guys hardware resolve more well in more these just macro got or And nature? more expect were to X as you you to less do specific when as issues

Sanjay Mirchandani

this. getting customer come they If get can No, it the they integrator and months they’re to or the can buying hardware, new buying want to out like -- together, in. the software, so It's tend hardware, then for to same wait project, then macro. hardware they waiting when roll then is to then deploying everything at refreshing time opposed to X the the a as

at they we Even the everybody I I mix little wish a the to when saw business, we'll we we've would we until and calibrate the tell control one doesn't our bit, for customer you little could though saw that we're actually part time. a bigger of science stack, everything not you're just hard -- guys. with just in tend QX. decision And that point. it else. factored ready. So When do We're say into won is numbers it's to happen in QX, it -- and a Not of that a downstream. I perfect bit

to but we're the storage, needs mix. et cetera, of some to our Our dependency kind the if low, customer personally is software very attach in server,

Operator

Steve from comes Capital question Enders with KeyBanc last Our Markets.

Steven Enders

expecting I large just the are much to a push those XQ -- to expected of deals the of over point? that kind get pushing. what or guess, line sense And get at kind versus make over take come for XQ you the I deals back quarter, better this sure to finish for that of or delayed does how is how did fiscal those it Is in there those the and pushed a to want Metallic I convert done? guess, to to get in get try deals that beyond? much are

Sanjay Mirchandani

we're that sure. think Sure, I'd seeing say lot those a I of already.

closed, Some close -- projected close some are will are quarter. to this

the -- we're all in. So come seeing that as

business everything has Now QX closes that this And to dependency in in then again you QX. or we're I best in that specifically QX we can't similar tell trying can. factor the

our both at out cases, look most possibly, of installed they've approaches, the existing in technology -- But call. for architecture, Metallic to in our swap just is on-premise okay, out got the not But they're it figure this most base got say, make it's so you've and what cases, to part an it got for and they've -- Just we that complementary offerings, this, swapping some us. out. something customers with

And not the power does cloud-native swap. And so these simple like nothing else. workloads band a Metallic frankly, one-to-one it's at

Operator

presentation. Ladies and gentlemen, this does conclude today's

You disconnect, and wonderful a have day. may now

Commvault Systems (CVLT) 26 Oct 212022 Q2 Earnings call transcript