Commvault: Fiscal 3Q23 Financial Results

Commvault Systems, Inc. announced preliminary unaudited financial results for the fiscal third quarter ended December 31, 2022.

“As customers and prospects continue to grapple with an uncertain outlook, we experienced slower than expected buying patterns and close rate execution,” said Sanjay Mirchandani, president and CEO. “As a result, we saw a pullback in orders in December, particularly in our Americas software business. We are well equipped to navigate through economic uncertainty and adjust our cost structure to changes in demand. While this performance is below expectations, we are confident in our strategy and will continue to help customers keep their data secure, accessible, and actionable.”

Total revenues for 3FQ23 were $195.1 million, a decrease of 4% Y/Y. On a yearly constant currency basis, total revenue growth would have been 1%.

Annualized recurring revenue (ARR), which is the annualized value of all active recurring revenue streams at the end of the reporting period, was approximately $641 million as of December 31, 2022, up 14% Y/Y. On a yearly constant currency basis, ARR growth would have been 18%, driven by continued strength in Metallic. Combined Subscription and Metallic ARR now represents approximately 70% of total ARR.

Software and products revenue was $89.6 million, a decrease of 9% Y/Y due to a weaker than forecasted enterprise market and execution on close rates. On a yearly constant currency basis, software and products revenue would have declined 5%. Americas software and products revenue declined 20%. International software and products revenues increased 6% Y/Y, which would have been 17% on a constant currency basis.

Services revenue in the quarter was $105.5 million, an increase of 2% Y/Y. The yearly increase in revenue was driven by Metallic. On a Y/Y constant currency basis, services revenue would have increased 7%.

On a GAAP basis, income from operations (EBIT) was $5.0 million for 3FQ23 compared to $12.4 million in the prior year. During 3FQ23, the company incurred $9.2 million of restructuring charges related to headcount reductions. Non-GAAP EBIT was $38.5 million in 3FQ23 compared to $43.1 million in 3FQ22. The Y/Y decline in non-GAAP EBIT was primarily attributable to the decline in software and products revenue.

Operating cash flow increased 13% to $30.2 million for 3FQ23 compared to $26.8 million of operating cash flow in 2FQ23. The increase was driven by deferred revenue growth.

During 3FQ23, Commvault repurchased $31.3 million of common stock. Total cash was $273.5 million as of December 31, 2022.