Commvault: Fiscal 2Q19 Financial Results

Commvault Systems, Inc. announced its financial results for the second quarter ended September 30, 2018.

N. Robert Hammer, chairman, president and CEO, stated: “During the quarter, we completed the majority of the operational initiatives of our Commvault Advance transformation. Our second quarter financial results partly reflect the temporary disruption from the implementation of these changes. These in-quarter actions were critical to implement our transformation strategy and, as a result, most of the major changes have now been completed and our entire company is focused on go-forward execution. The actions we took to align our cost structure were evidenced in the 61% year-over-year growth in non-GAAP operating income. Now that the foundation of Commvault Advance is largely in place, we believe we are seeing increased momentum as our channel strategy, go-to-market initiatives and alliance partnerships are starting to show positive traction.”  

Total revenues for the second quarter of fiscal 2019 were $169.1 million, an increase of 1% year-over-year, and a decrease of 4% sequentially.

Software and products revenue was $69.5 million, a decrease of 3% year-over-year, and 7% sequentially. Subscription software and product revenue comprised a record 43% of total software and products revenue, an increase of 136% year-over-year. Subscription and utility annual contract value (ACV) grew over 90% year-over-year to approximately $76 million.

Services revenue in the quarter was $99.6 million, an increase of 4% year-over-year and a decrease of 2% sequentially.

On a GAAP basis, income from operations (EBIT) was $1.0 million for the second quarter compared to a loss of $4.7 million in the prior year. These second quarter GAAP results in fiscal 2019 included $6.1 million of expenses related to a non-routine shareholder matter, a litigation settlement and restructuring. These expenses have been excluded from non-GAAP results. Non-GAAP EBIT was $25.1 million in the quarter compared to $15.6 million in the prior year, an increase of 61%.

For the second quarter of fiscal 2019, Commvault reported a GAAP net income of $0.9 million, or $0.02 per diluted share. Non-GAAP net income for the quarter was $19.1 million, or $0.40 per diluted share.

Operating cash flow totaled $17.8 million for the second quarter of fiscal 2019 compared to $9.7 million in the prior year quarter. Total cash and short-term investments were $484.1 million as of September 30, 2018 compared to $462.4 million as of March 31, 2018.

During the second quarter of fiscal 2019, Commvault repurchased approximately 201,000 shares of its common stock totaling $13.3 million. On October 18, 2018, the board of directors authorized an increase to the repurchase program so that $200 million was available for ongoing repurchases and they extended the expiration date of the program to March 31, 2020.

Recent Business Highlights

Innovation on Display at Commvault GO in Nashville
Aligned with the key foundational emphasis of Commvault Advance – to keep the company’s innovation front and center – the firm successfully delivered another sold-out customer event at Commvault GO earlier this month. The event showcased innovation with announcements made possible by the Commvault Advance initiatives on product and go-to-market organizational focus.

Announcements included:
• A new industry-benchmark user interface known as Commvault Command Center;
• The launch of as-a-service options for the company’s hallmark Commvault Complete Backup & Recovery Product
• An expanded portfolio of appliances including a new larger scale-out appliance for large enterprise and MSPs, and a smaller backup appliance for remote and small offices;
• Expanded relationships with partners NetApp and Hewlett-Packard Enterprise; and
• A differentiated offering with Commvault Activate to help customers solve a CIO priority to discover and know their data across their environments.

“In summary, the announcements and information shared with IDC at Commvault GO left us feeling positive about Commvault’s progress,” said Archana Venkatraman, research manager, and Phil Goodwin, research director, storage systems and software, IDC.

“In conversations with IDC, many of Commvault’s customers iterated the benefit of simplification, consolidation, and analytics that the platform offers. What differentiates Commvault is that its commitment and focus across multiple geographies including Europe and Asia are on par with its North American focus. This was evident in Commvault’s strategies around European regulations such as GDPR and its cognizance of Ali cloud and Asian regulatory dynamics. The vendor’s frank discussion about its strategic direction, combined with ongoing commitment to its new product architecture and pricing, and the potential of new products like Commvault Complete Backup and Recovery as a Service, were all positive developments,” he said. “Looking forward, Commvault’s ability to slowly increase its indirect and partner-driven sales revenue, combined with its ability to gain share in the mid-market, will be important, quantitative signs of success. In conclusion, GO 2018 presented us with a self-assured and driven Commvault. If the vendor maintains this drive with its developers, customers, and regional teams, Commvault will be able to scale its business to new levels.”

The analyst comments are part of a IDC Perspective, entitled Commvault GO 2018 Highlights.

“Commvault GO reinforced the power of partnership and how true tech industry leaders don’t just deliver you the technology you need to realize your business objectives,” said Barry Hubbard, senior director of global Infrastructure, TiVoo Corp. “They work with you to understand these business objectives, and invest time and resources in helping you determine how to best use both their own technology and other technologies to realize these objectives. That’s what Commvault has done with TiVo. By collaborating with us on our strategic initiatives, we have been able to determine how we can better activate our data so we can provide our customers with information they can use to build even more meaningful relationships with their audiences.”

Customer Business Validates Commvault Value Proposition
The software publisher also announced a list of new and existing customers who had purchased products and/or services during its fiscal second quarter, across many industry segments and geographies from around the world:
Ace Hardware Corporation
B. Riley
Banner Bank
BriteSky
Cisco Systems Inc.
City of Kent
Cork County Council
Essilor
Fnz Ltd.
Gaylord Hospital
Hunter Douglas
International Christian Hospital
JFK Medical Center
L.L. Bean, Inc.
Medical College of Wisconsin
Metropolitan Atlanta Rapid Transit Authority
Milliken & company
Mitchell International
Neixar Systems
Haitian International
Ningbo International Logistics Development company Ltd.
Parkland Fuel Corporation
PresiCarre Corporation
Rochester Regional Health
Sony Network Communications, Inc.
Swinerton Incorporated
Synthos Group S.A.
U.S. Dept. of Commerce
US Army
US Department of the Treasury
WEG
Western Maryland Health System
WINOV Solucoes em Tecnologia SA