Earnings call transcript Q3 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Commvault Third Quarter Fiscal Year 2023 Earnings Conference 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] Please be advised that today's conference may be recorded.

I would now like to hand the conference over to your speaker host today, Michael Melnyk, Head of Investor Relations. ahead. go Please

Michael Melnyk

infographic welcome for Melnyk, and by earnings call. the CFO. conference Mirchandani, metrics and Good posted is of to Investor Michael on An Commvault's Merrill, Head CEO; Relations joined key Relations, I'm financial Commvault's operating website morning, Investor Gary our with reference. and Sanjay I'm

uncertainties refer made reports Commvault today's call filed statements the Commvault's the risks and plans Company's expectations, for not such in on to obligation does in release different statements. discussion will cause forward-looking about today's and to results Please Statements and recent of prospects. subject are contemplated and cautionary be language materially risks, Commvault's assume any to with the future the to periodic those SEC actual from include forward-looking update assumptions. could statements. uncertainties forward-looking All that earnings statements those most a the

non-GAAP results our During reconciliation website. this on us. financial again and Commvault's Thank found between call, on you are for basis. measures be non-GAAP joining A GAAP can a presented

turn it his remarks. to Now I'll Sanjay over for Sanjay?

Sanjay Mirchandani

Mike. you, today. Good joining thank morning for Thank you us and

our month, in delays noted this deferrals spending, and acute Earlier were which particularly December. in we customer

that We in cautious are around are the customers spending current increasingly not alone. more It's clear decisions prospects and calculated and macroeconomic environment.

navigate in allow to of reflects for the solid that future growth us responsible long our several in current we said, foundation There the we company built quarter growth have expect which a That potential. indicators economic strength are will on our run, environment. the

increased in best customer the constant currency. was new QX wins starters, in five ARR years. Total year-over-year for XX% For quarter

cash This future XX% and total flow SaaS repurchases. growth represent returning well through steadily free we share ARR expansion for importantly, bodes now cash delivered of and healthy And subscription while More grew XX% possibilities. ARR.

acquisition and detail proving shortly. be expansion. the customer in But and is quarter, Metallic to X,XXX a approached I'll customers powerful during discuss more Metallic

also up SaaS in next Metallic ARR, QX. initial came We sets million growth in The for saw ARR. software our which our deals for expectations $XXX below nicely large healthy very milestone, in

long-term We data remains as ransomware challenges to the while because future, hybrid dealing in and are a confident the with their cloud, strategic to transition other of our protection customers business. risks priority first,

Second, the see our as to the on as journey our views market portfolio best-in-class. customers And their us cloud. critical

This the creating change constantly let's of those be it different of pronounced protection macro, the uncertainty is today's supply and the threats all and charts protecting The accelerated, customer to customer years. to for data Perhaps, strategic ongoing objectives. environment. priority. will journey the organization's is ambitions data. hybrid and every evolving are innovation for chain pace shortages, of for skill discuss and in is The cloud uncertain these even Ransomware, more

need flexibility Customers to risks maximize costs balance to the and business outcomes.

uniquely required them give this to consume choice in the world. and We flexibility they are in data to positioned protect difficult critical how technology

This brings my second me point. to

offering by new leading footprint is us capability, has industry-leading expand enabled Our and portfolio This scalability, and edge to proof. win customers solutions. capacity, and future our

environments new workloads is new Our support for and unmatched.

For cloud-native often instance, and applications, build as they use Kubernetes. customers workloads

best-in-class. Our is support for Kubernetes

Kubernetes was the a outperformer Radar third leader just GigaOm running. new for named In Commvault fact, and for the week, last in Protection year Data

and they support in This as mind that customers peace the ecosystem for the us of It's gives a we a software of the one future. evolve integrate our they data as single We in platform and our broadest on with the glass. do pride customers pane industry. have this, the cloud in engineer for so matter products don't under protect today our customers give to, of and the and to applications we choice of SaaS

us VistaJet customer, pursue in land multiple helped and cloud, enable For than this [VistaJet]. a SaaS the native the multi-cloud was backup adequate instance, exploring VistaJet relying their them resilience cyber in strengthen and within its the breadth simplify, a reduce chose cloud, significant Rather growth costs tools of offerings, new ambitions. Metallic platform Metallic its strategy. to Kubernetes our including to

We also dollar and to SQL European with like deal a displaced the of We while landed large the a risks migrate an reducing workloads Oracle all to protect and ransomware data cloud, energy incumbent vendor a public multi-million server company. on-prem attack. safely

of the protect to scale not could customers' amount data. competitors Our vast

met they to other take are We to go. at these different journey. we'll stages where them see One on both workloads, their two focused cloud one and customers where to they were hybrid on-premise of the You them multi-cloud. existing able on be want

Metallic. a on bit more Now little

continue additions offerings and quarter to stage of on we Metallic being for sets Commvault. momentum cross Metallic are with to new XX% in ARR. the robust, in upsell world-class as laser-focused gain This the Our motions driving our

which one ThreatWise, offering Metallic early showing In newly as fact, Metallic than customers released more traction. our such now XX% is good of have

customers grow are to as workloads expanding Metallic new offerings change. also the a

software and XX,XXX and both. This instance, Metallic TCO, journey, Corporation, Exchange be or Metallic expanded their accelerate simplify another notable Commvault is to example helps minimize Microsoft SaaS with a global customer manufacturing mailboxes. their protect recently or it existing For customers data, cloud an Linamar their of with company protect environment how up to

contribution SaaS ARR, Commvault. reinforces to that a is right customer move growth the indicator increasing is Metallic for positive bet is our long-term that and on

more part the becomes look close event. we detail and year, an more we Metallic to providing our material investor forward a business, upcoming at of As

financial results. discussion Now, I'll turn it of Gary a over to our for

Gary Merrill

everyone. Thanks, Sanjay, good morning and

unless will of Total basis. with quarter million, $XXX on rates of with were basis growth quarter otherwise X% quick an revenues year-over-year a stated. I constant a increase the the currency for start on recap a

quarter approximately of Software X% currency and a products basis. revenue decline a for the $XX on was constant million,

define variance as execution we of which transactions weaker-than-forecasted a on was $XXX,XXX result close market large the greater prior QX our current million prior products and the of guidance software software of and XX% represented the in from Revenue down QX than in with against XX% The deals, compared revenue to revenue year enterprise was rates. the quarter year. $XX versus and of

for The average the in down in the size large with This evident large revenue deal XX%. deals deals shortfall total was was in was Americas, software $XXX,XXX. particularly quarter

revenue XX% delivered Our software constant on strong results currency a international increasing region basis.

On transactions. as a customer consolidated view, modest software transactions revenue $XXX,XXX we side in a velocity by business, increased saw driven our under the software X% new acceleration of

to Now provide headwind, positive color around trends that the on I've subscription I'd the our quarter, large like discussed momentum. in more and SaaS some particularly deal

total only approximately XX% the represented $XX revenue and software total which XX% software QX of year. software in was of Subscription of revenue, prior million compares revenue to

has conversion new transition of subscription driven perpetual a model. and Our customers acquisition been customer by the subscription existing strategic to

our of agreements, professional $XXX an customer Metallic Metallic from increase Services revenue, by which million, services the of X% revenue. on continued includes driven was basis, support and currency acceleration a revenue constant

we customers in perspective, years. of for subscription a new Metallic the and both. best software in count customers, customer From our many new customer SaaS customer had quarter combination growth We saw

of As noted, of offer the can Sanjay and best are we SaaS. only software that customers best the provider the

give annualized ARR into now some our or will recurring revenue I insights metrics.

constant $XXX balance. million currency. total growth and XX% represents million as XX% reported total year-over-year approximately now ARR to and to increased increased Our ARR in ARR software Subscription $XXX revenue of XX% and Metallic XX% our

mix third expectations. of quarter expenses $XXX software will I is XX% profitability. discuss lower revenue, the margin our X% operating expenses million, Gross for on, of a were and down Total reflects Moving first QX year-over-year.

quarter. at QX, to start compared our global headcount X,XXX to down the of X% During was the X,XXX employees

people, facilities our managing by investments and critical are We most on focusing third-party our priorities. expenses

EBIT primarily base lower resource Non-GAAP against The revenue environment. We non-GAAP software to EBIT our resulting evaluate EBIT in the in will results. of continue XX.X%. an market $XX.X our attributable million was to demand margin decline was

Metallic. sheet cash, was basis, Moving period the a XX% year-to-date nine million generated acceleration flow prior was XX%. cash quarter. constant balance on by for we now month We with nine year. XX% $XXX ended million the of month $XXX $XX driven up the cash basis, balance up On million this of or metrics continued debt States. free and XX% of quarter revenue on increase cash deferred to an a currency of same million, the some flow total in flow, in of the key of is no and United versus Quarter-end free the cash QX $XXX

be As will a flow of second $X payments related burdened half approximately of by tax reminder, TCJA the R&D provisions. capitalization cash federal million fiscal to

strong While flow cash are in and both our generating software how diverge P&L, and Metallic businesses. accounted they're our they models for

the growth business Metallic results, will believe we to our more be metrics operating business ARR model. and strength cash of our becomes of our As part key meaningful flow demonstrate a

Falls, of shares our Today, XX% and Jersey common our intent cash Fiscal repurchased million a X.X During million. stock this common space. $XX also million repurchased our free for to New leaseback QX, of shareholders, our existing believe year-to-date, Tinton sell responsible. $XX stock, of we only is we're We we've small the to flow. announcing XXX,XXX fiscally footprint of representing returning headquarters shares corporate in

XXXX $XX more in of the with companies approximately have hybrid of our million. many in evolved Like sales fiscal to is proceeds workplace. transaction half industry, we first flexible, a into The expected close

Now, I discuss our the will quarter. outlook fiscal fourth for

larger especially on business part We diligently outlook if to IT take spending may monitoring new macroeconomic projects. the continue are transformational and is close, transformation believe, to consolidation customer We of projects. and large longer it

at our quarter-on-quarter from million. driven be sequential flat by and approximately is be revenue will includes to customer revenue expected revenue $XXX.X software Services Metallic $XX.X agreements, our QX expect which support million professional with services, business. We growth Metallic revenue, approximately

be to these levels, revenue is a approximately QX total XX%. expected we expect approximately result, to margins At gross consolidated QX As $XXX fiscal million. be revenue

in will margins services our the incremental margins outlook. to as lower see our relative due current to on includes gross which some software forecasted pressure We revenue, Metallic SaaS increase

year-over-year. QX operating $XXX expected approximately expenses be X% down are million, to

be expect QX approximately will EBIT margins We XX%.

be to facilities balancing profitability, Metallic. while growth people, and continue maniacally as expenses, in investing such on third-party managing initiatives We focused

cash to and Moving share flows repurchases.

We sequentially cash. share to will in expect use cash that currently excess the continue best of and QX represent improve repurchases believe flows

balance, Given share current levels. repurchases the year-to-date QX increase U.S. will cash and flow cash QX results from our

count QX for projected is shares. Our XX approximately million share

we Our on maintain execution, and our team philosophy. responsible will is focused operating growth

I remarks. will for closing Sanjay? Sanjay now his call turn the to back

Sanjay Mirchandani

Thanks, Gary.

the economic journey. provide that longstanding Commvault endured like we've technology need wherever flexibility in market in only our are can customers they world. their today's They by and a cycles supporting leader, As difficult this,

two Investor an shareholder the recurring Day. years, and and confident innovate sharing that in continuing and progress value look to a to significant industry-leading continue I'm products. while our revenue deliver at you to build track we've model, upcoming Over to with delivering more subscription forward SaaS-based on past made we're

open let's Now it for up questions.

Operator

Fargo. line question the Aaron with first Rakers from of coming Now, Instructions] [Operator Wells

Your line is open.

Aaron Rakers

going what's and Yes, I want to in guess, start the questions. thanks the of I for about macro with taking business. impact maybe your thinking on the to just kind

around perspective any as from retention, share Specifically net renewal that renewal of you to 'XX. front? start seeing those What changes a as what the on changes you anything rates, dollar any opportunity the in come we seen fruition? renewal opportunities to about some you assumptions or Are of or business have of fiscal can think

Gary Merrill

Gary. Hi, Aaron, couple it's Good things. of A morning.

Aaron Rakers

morning. Good

Gary Merrill

related subscription Our renewals, QX. fiscal for software the to expectations they business, our especially largely met

of So, on some with retention both historically. the metrics our we're discussed we've around rates renewals, that track

historical look slightly We QX fiscal versus renewal as bigger And QX, a have QX are in well. ranges, into those quarter-on-quarter, which forward good. still population as is we we

track on there. we're So,

IT really as some talked the drove on was transformational remarks the projects, and enterprise really driven expense land mix, What large business. about we of really those in the prepared

Aaron Rakers

to embedded as is your guidance? of what revenue quarter, appreciate quarter kind to that this kind this or underlying you expecting your delayed, guide come pushed out into quarter those in those regards this around further help you the pushouts see can last assumptions opportunities far that? maybe you Are as do with us And of deals in

Gary Merrill

into the to we Aaron, the fiscal software out as largely we we of as expecting QX. that so during fiscal it have the expectations QX current to We're business. continue side move Yes. the dynamics we is relates that, into as them saw look that QX fiscal

we lost. in decisions, deal The the they're majority purchasing saw not The expect them QX, that pushed that good we big are our the fiscal in continue. impact of news play. deals in some vast The that multi-year still of will is

on continue them. work to We

and this a with in close We continue good of we dialog customers actually portion expect to fiscal QX. our to

Aaron Rakers

just then And final question. quickly, real Great. the

us, XX look talking you ARR you're look I the As I interesting sounds strip momentum of well kind actually an to the services a is acceleration it of Metallic, level of on and revenue to, like think kind services I set at Metallic is, was the at is think what's like I that quickly that within If piece looks recurring about out balanced. said just and think XXX%. fiscal how I it XX about north growing of Metallic ARR I way relative your support exiting last of it, line? good 'XX, what is quarter total growing

Gary Merrill

you in makes happy if growth relative that that fiscal a quarter-on-quarter QX, even accelerated the actually look Aaron, results versus really from sequential seeing. Metallic us we're we with saw so QX the QX, at

us quarter, Last our kind business in to to term. for engine well milestone that on We're customer the we of Metallic provide The basis well. near ARR. track ARR that amazing an be the to as $XXX next mentioned million hit on new acquisition able was continues that Metallic

smaller, are sizes deal the Now right.

period Obviously, if in ARR, XX% what's I was you what's sequentially P&L great shows business with think which lower stream, us it's year-over-year, which through about as up, which excited kind our Metallic X% up, even come that that from in that to was that our to look that deferred show would we it kind drive sequentially in of they you a combination business, continue at recognized makes they of are of we're But predictability revenue financial not growth, perspective. future that revenue happening So combined stability really out? build capturing ASPs.

Aaron Rakers

Very Gary. helpful. Thanks,

Operator

please question. Thank you. for One moment, next our

Our from of with Jim the Piper next question line coming Fish Sandler.

open. line Your is

James Fish

to the was reduction, this cost quota-carrying? as well impact OpEx there the fiscal about headquarters amount both? what you then you questions. a additionally, kind of reduction Maybe in the in Hi, pre-announcement, talked from the headcount the how to think top-line you savings the the thinking of impact get side, And guys. there. about Thanks understand as for of sale to with Separately, trying the of are headcount about the is guys that kind on 'XX, the way

Gary Merrill

from you couple Gary. of I'll it's things Jim, hear side. hit, Good the Yes. especially on to again. A cost

down we mentioned, X%. was headcount our As sequentially about

we is, offset benefits temporarily. that fiscal couple have it see things those Some will QX. levels QX to start the here there's will we of just fiscal of a in related produced of in What salary though kind

This quarter to over portion employer start is our of FICA the related for taxes.

just employees. our by last quarter the some naturally savings of year the of a reset existing So, for quarter calendar offset we some would review payroll this increase see and -- also merit are was

had a up we bump little bit there. So of

start happen So, that. benefit, the fiscal out when some of into QX. muted impact of look the we does in But see the really, when that's benefit I to 'XX,

James Fish

Right.

Gary Merrill

So, go ahead.

James Fish

Towards fiscal fiscal than QX. 'XX rather

Gary Merrill

Yes.

So, 'XX that out you X% reduction. roll 'XX. see those that based what you into expect I fiscal big would can to fiscal as savings expect on model perspective in mean, we We'd

things a it's to regulatory related Jim, consent going it to to As some building, the to to to close. through relates quarters few get with go on one state building. the have approval take two to even we the

we fiscal savings to material we modest. into second a of quarter will won't be it modest as 'XX. the some It see when maybe So, see savings be kind impact of get well will That therefore, start will there. but

Sanjay Mirchandani

the Sanjay. on we just that. quota-carrying the this heads, On sure on we're is Jim, making focused touch quota-carrying, top-line. obviously don't The very affect to

Gary Merrill

is This business. fiscal top done will Yes. we've Jim our for line. about and the 'XX the across impact outlook Nothing, efficiency

James Fish

for that down from renewing different term Okay, one you to things tech fair shorter me, you and three deal? is in customers guys. the when duration Last year on of contracts, seeing to hearing lock we're say term a from, you, around across look seeing enough. renewal? term guys one longer Thank kind at are a a deals deal contract often year term let's Are how all or customer of

Sanjay Mirchandani

pressure business I think In see fringes. happening, Jim, our term the it's do We length. on

in and see in continue we're we've on the which Our our we're But businesses through about the confidence average gives it We to in years pretty to renewal term, even three meet spots. us two some some and quarter average do outlook. between talked expectations pressure somewhere that an well. term holding managing certain

James Fish

Thanks, guys.

Operator

Thank the with you. please Howard And next One of Guggenheim. line from question Ma for coming question. our next our moment

Your line is open.

Howard Ma

and have Sanjay question one for for Gary. you. Thank one I

So those deal scrutiny unique increased budget Sanjay. environment. first certainly that in and to pushouts, for not acknowledge We this were Commvault

any data to on become consider protection that the there years understand demand I Thank decisions, are relative evaluating acknowledge has so being general near-term factoring rates. as protection IT that is your larger in remarks. the back more has put pipeline signs also We change you data of conversations, But any kind in changes that projects. within how increased data protection an you. and out IT recent potential - ranking, priority you burner part but we recently you pointed there those are in in purchasing broad relative And Commvault or and your as said prepared been one in then is transformations, that's other part. of the your close customer

Sanjay Mirchandani

to Got it. to Hi, Howard, you. good talk

see me look see you'll question your if growing adding of let had you business at looked to Metallic - shared the was So healthy. if the I on - part one if Metallic, and be best metrics that some we at, on well. of is year-on-year. of We're we'll we've demand the growing We're sequentially. The growing customer Obviously, additions. is quarters I

was things if business, - thesis is to I data think question. with sort and Metallic I your protection And to Sanjay you good I is - give where on a which really is broadly the of workloads, largely are in cloud-based doing So if place. a

a saw an being customers' years journey all-time cloud lot as I because of two we the the an let's accelerated, high. tailwind to past, think of at pandemic being say, ransomware we - over the industry, customers saw

modern of lot saw feel - I large transformation at of ransomware of projects is data left-to-right protection - suite of Where it easily view are for defenses a fleet protection technology customers make with of think that a was [ph] entire they've sure the we level we where in. some their years protected is like being ours. looked was phase at was the point sort modern like got the first after many That was caused They many from protected to done. that

of it's now and up the And the matter rest with a optimizing going of really fleet. the stack

there - momentum. is So so change that if in would, that, you

customers brought into QX, The into were a and fiscal least futures customers they - and I say. the is and architecture in calendar at the - second their lot go. saw piece - they're pause cloud seeing And where brought think we stop, at of the point capacity QX, where infrastructure go and

a see routinely budget We flush.

there are sort see of provisioning storage we I view. a of point think there. of a from view, view, point cloud point little And from we of a You was purchased using capacity pause from a what

So in future way demand a don't I conversation, any top that protection I of my see that the for - in of - continues less priority. and we the to be mind think customers being data to

doing it well I we've is are most are what using like we little the on. to? and where a What like right? it's it Are there's Are customers and we look we point bit macro already think companies of going that committed is, where covered, see at this with with

- But were that come be Gary guess said, on will, Gary shortly. take on we'll of let Gary things some our.... second question, I I'll part how to I your back where factoring think into on let that, take things - I'll of the as

Gary Merrill

yes. Yes,

into saw that QX that dynamics we quarter-on-quarter bit levels. little at of a those QX, thought in the assumes So uptick Howard, factoring the we Americas we our that especially how for continues the outlook saw, our about

the ability perspective, exceed a us that of rate QX And pipeline ensure to roughly from we close have basically assume and now our in it we we projections. we're close to do and making similar the we So have rate focused the on close front expectations. for sure inspection

Howard Ma

right? that Okay, But services with held can and and - My constant constant X% currency XX% you that pretty implies And were pretty us strong, both that that and you reconcile thanks ARR growth revenue I the the - currency strong. is soften X% subscription mean for products? Gary. total decline that total of follow-up help growth only

does weighted And that specifically, really license I the was licensed. more that the shortfall right difference mean mean, is like

or license, duration, just were So any - contract that weighted would overall other the license? called So the there lower reconcile in you have subscription was impacted really that perpetual more with towards like factors subscription business to because ARR? out trying

Gary Merrill

That's fair.

ARR be ARR year-over-year XX% very as to is you continues our XX% contributor that strong, The biggest So at Metallic. growth. see to

contributor, help will So biggest has no us move recognition Metallic we becomes our the on forward. That which in-period as P&L.

software So handful comes IT look down of reconciling at back ARR, large basically tied when the you revenue a to transformational results to it projects.

I about still here frequently a of XXX stated of bit pause Sanjay slowing little talk over a did and We just a mean on deals. maybe We optimization. large those

larger still $XX we're to many projects recognition. IT our that great in of or that shortfall. Xx it a actually transformational you an look seeing comes space. right? on when about the of transactions, the down enterprise So million multiyear So is that at in-period impact drove It momentum And population

Sanjay Mirchandani

the of done gotten and lifted again, part question, or through to low-hanging are that. your customers of feel shift a Howard. lot coming - Yes fruit workloads the of the like It's they've earlier back

stuff more the It's to Now be it's you more it day-to-day the about workloads. business that time. cautious runs tougher that the mission-critical workload, takes have the and

have working complicated sort we they're and and So obviously customers, with more conversations I in that those think many longer. through are of take

Howard Ma

helpful Thank really you so much. color guys. is this Okay,

Sanjay Mirchandani

Welcome.

Operator

with line our coming Martinuzzi from Lake Eric of Thank the Street Capital. you. And next question

Your open. line is

Eric Martinuzzi

Yes.

as far have expected or shortfall you in Just was in January January December? was it the an given seasonally see in looking was with would sentiment December, in improvement there the to month buyer any line of indication what as the if

Gary Merrill

budgets. frame QX. think from to our guidance. good Gary It the it's new see at it started more continued to do thought levels January, some of We are their Eric, Many we of saw last outlook What buying quarter. with of would in to in refreshing way in Hi fiscal companies continuation month calendar line reflected fiscal patterns year start were I a during kind similar And we the on morning. best what the the is the we of in year. of we but the it's

Eric Martinuzzi

you trying talked the flat X% conditions then navigate of current roughly about release, guess X%. And press December philosophy I But in we down a just on guidance then but at seasonally, looking to we're currency to And you look - Okay. I'm the 'XX a the constant growth. here, macro committed basis. responsible the for a plus is quarter, for If still QX seasonally, QX. FY QX down guide would be that not but from QX,

talk So growth growth? when see do that we you a when responsible about

Gary Merrill

so 'XX. Eric, yet comment fiscal going in Yes, to not we're

are fiscal reflected what we see now that tied we're in, As time. is, we'll to of We're - quarter guidance our the our current end some QX through keeping we of in talk fiscal continuing. in in point the QX about of outlook some at our in the

to So all focus continue we of on - right? expenses our maniacally

up X%. from cost, our base that a to basis month relative been are like demand our about revenues sure the facility Even we nine optimize top our that we'll talked the as a in we whether well, So costs QX it's perspective we continue to third-party today, month contractors on period the make expense nine see. and line people

flat. is OpEx Our

make our obviously line. in top be muted will the keep we OpEx QX, relative And to down we're to OpEx trying growth year-over-year. So sure

Eric Martinuzzi

Got it, thanks.

Operator

Blair. next line the Thank question our question moment you. William our One next coming is with Jason Ader and from

Your line open. is

Jason Ader

Yes, macro, obviously, everybody. [VAR from are here about seems the everyone because channel, checks], for guys in it this like talking talked good [Rubrik you folks the thank and just like gaining to a Cohesity] guys I mean, advocate market? lot that's a challenge devil's just in you of guys. and morning to ground But is play want definitely I

you How thoughts those versus So big you're two year just don't and are seeing factor to because get those here getting they're want pretty today what a or are growing And maybe a seem does well. wanted out want pressure ago? be guys competing to in guys head-to-head it like current just your just on the sidestep the I competitive very it I because - could environment. to of

Sanjay Mirchandani

we growth that the what look notwithstanding -- our it's if the I will at even and Hi quarter haven't anything, to anything business the how kind mentioned I'll landscape a from quite all at up them to Jason, look really time. of momentum a business. combined good customer for it's XX% how this say it's we winning you to a we've you growing hard software on - of you with XX% If The Sanjay. additions the is against at and customers -- and you're don't hard look ago. I some look may, available against word both, SaaS time new well you you competitive look couple were and to the have you real seeing the that the we're seen to side because for year if how in the of different or Actually, marked Metallic, win. growing okay? ones from the you and ago me quarters that that you readily and our all it they're we've say the and is combined they're got So your at -- to as what our got it take -- as have at know I shortfall of have information business, we

deals, larger has in we that fruit, are said, like which I low-hanging the because think been also longer take I transformational done.

those. complicated. are need Now win to the just continuing to the more big And mission-critical workloads They more to that be are cloud we ported time. need

nothing you If renewal look sets that at our backwards. there's there us rate,

right. to word concerned, growing far your as take at that But we're as have doing us. I better just it than for they're So we're

Jason Ader

the just guess execution on is question field then and the -- me coverage. I for And Okay. follow-up

You on a guys been become more have path multiple now. to years efficient for

coverage you've So said, some don't to through where of process or this this players the sort But or anything -- know because execution about workforce that of we of we a this coverage of macro weakening you okay, the made, just guess field. I you are kind fix have need identified if you changes it's making where right on I have sure and on it's and all change and you've issue. thinking the well,

Gary Merrill

Jason. It's Gary. Thanks,

sure this that it that we we inspection that So driving through pipeline the inspection, compelling and make sure down have, control on focused customers. making us, as can we right that we can in what buyer can make to right? line we then the event a we comes for environment, are the broad sure reverse time we the control go-to-market and work is have we're and teams, the So segmentation the to to that doing the with have that economic macro

a in the that actually back for pipeline on basics, we us, going it's going the environment to back controlling the have. to macro tough basics deal and So inspection

The is sure our we point we're of closely really transactions especially partners where building right? partner And environment, macro those also other environments, down will our is with working percent through with this, business XX-plus double plans key environment, partners. this in especially community, go in in globally. that's important really the making all

Jason Ader

Thanks guys. Very good.

Operator

Thomas question of line Blakey next Thank coming from KeyBanc. [Operator Our you. Instructions] with the

line is Your open.

Thomas Blakey

guys. Thanks for here. questions taking thanks Hi, my

that on a the saw some quarter subscription transition. transition. take the questions, bit Just to last in perspective you to from kind to seemed linearity on wanted deeper macro dive up little quarter maintenance have these this stepped What of of a

ratio alone the Metallic gotten for you of downside, again, have better. just ARR, seem decelerate the kind but take-out accelerated estimations while ARR if subscription, to I to maintenance continues just subscription to that think

sorry, But save Just maintenance just non-subscription in to looking maintenance a macro. have there from continued in something. I'm wanted know was that the how macro, to impact know the I in on transition. coming want -- what I how could the or like and to past I are customers lead there money this I strength there discounting that to don't understand quarters the follow-up. maybe dynamics to know was the -- on

Gary Merrill

one. take Good morning. I'll this Gary. It's

unchanged see. the on way older couple our to perpetual So strategic think times, kind about to largely, work from A many customers of and you you financial as have and software. walk customers convert subscription-based with our it a And strategically we've talked I'll them standpoint. a to that I maybe that converts And we through state. of steady say, looks would program trends best a

Even within we our our customer release, disclosed revenue. support press

the revenue, customer Our it's mainly which XX% is was revenue -- business. perpetual support down our renewals year-over-year. from That

that driver the Now year-over-year is decrease currency. for biggest

If constant on That's revenue It's year-over-year. in quarters support down customer you X%. three basis, X% been our strip a down was out currency currency, row. a

at in model trending in think think So always way about we're customer in it's towards. that it of state best about the way the a year-over-year that levels revenue best it, decline mid-single-digit kind steady had of it's is that kind working to similar to support probably that

Thomas Blakey

Okay.

of direct to discounting maintenance -- -- wasn't extra okay. subscription any to quarter there So in be switching in just from terms over and the

Gary Merrill

standpoint jump recovery recovery from standpoint. in a from a No, --

we the right were So you on did part recovery target. that mention initial in the standpoint, question, of

Thomas Blakey

margin. with Metallic. regard transition Metallic on us gross where pressured in here then in margins much where getting quarter, here of The services levels the it model nicely basis expect of congrats next And you. revenue in for to possibly. are Can our parsing in Thank you. larger in million grows terms about gross the it. with line the revenue, that's kind just we remind Got again, so that ARR smaller XXX future? you by to those on there, you Metallic, and out crosshairs points with that piece decline as Thank it. be first of Got ARR of the the $XXX revenue all,

Gary Merrill

sure. Tom, Yes, for

pleased we're on perspective SaaS still XX right? we're on get months margins, from XX we're to track margin where more out, to the We're best-in-class a of To We're that at. with with Metallic. So trajectory.

If you same line, the trajectory. other companies through look at this gone line that transition, the of in same we're all have

Metallic through as there's business as we're detail to next the margins. Metallic pleased share fiscal and quarter we this towards will it we work into and So fiscal more relates year, getting that

remarks, On acceleration Metallic revenue consolidated the the software. of we headwind, gave basis, bit for in relative as to a outlook a little of on have I prepared a mentioned we do the

partly consolidated Metallic a is view positive there a compression But as that clip. we're very accelerate means some margin that fast on a as we because at seeing basis. So

Sanjay Mirchandani

here. Sanjay Tom,

optimize the mean, color. the more conversation service. one on my we I Just organization the a margin how number engineering little is for priority

a we growing it's It's at very host young that doing of We've So scale. services well. very coming It's It's a service. got quickly. keep adding.

So there's class. that of doing a we're work lot proactively be to of best

but we assured better team engineering importantly, is it we'll on that. So at that rest team how my operations my and more, get priority the more share for top

And get when XX to it it amongst why SaaS $XXX This us we're to SaaS needing business journey. of got to in if scale scale. million, a where also That's point a fastest-growing businesses look the best is to of businesses on to, infrastructure the very Gary's on history to XX months you say, the we truly took that It's in be let's is we've class normal get up. at space. what

So a there's there. lot

Thomas Blakey

want It's against on basis. a a business was this good revenue point, don't invest ago, to and not you years this opportunity. Two $X

when take, or when give you Metallic? break along you out will -- So just you those will it's -- lines, do XX% revenue this expect

Gary Merrill

headed lot standpoint. we're interest a think our the of more introductory next we but there's the come fiscal of to call just Where earnings I end business, in a when margin to a get Metallic QX, is from not revenue and that at

future So I think we'll at work towards call. that a

Thomas Blakey

know there any on it's macro? Okay. been but the Metallic, And with question have in last my early on I just impacts churn churn.

Gary Merrill

No. No.

on where and very those a rate are strong a pleased Our and dollar are rates from we're net headed retention, both very renewal well. as strong renewal with gross really rates

Thomas Blakey

guys. Excellent. Thank you,

Operator

this questions time. I'm showing at further no Now

Sanjay Mirchandani

following May Thank frame. our you We forward for you, the speaking time the usually everyone, fiscal Thank today. with year-end joining look to in you. call

Operator

concludes gentlemen, participating. call. you today's and for Ladies conference Thank this

now may You disconnect.

Commvault Systems (CVLT) 31 Jan 232023 Q3 Earnings call transcript