Earnings call transcript: CommVault Q3 2024 beats EPS, stock dips

CommVault Systems Inc (NASDAQ:CVLT) reported its earnings for the third quarter of 2024, surpassing analyst expectations with an earnings per share (EPS) of $0.94 compared to the forecasted $0.87. Despite this positive performance, the company’s stock fell 7.25% in pre-market trading, closing at $146.82, down from $158.30. Total (EPA:TTEF) revenue reached $263 million, exceeding the anticipated $245.93 million. According to InvestingPro, the company maintains impressive gross profit margins of 82% and has seen 7 analysts revise their earnings expectations upward for the upcoming period.

Key Takeaways

• CommVault exceeded EPS forecasts by 8%, achieving $0.94 against an expected $0.87.
• Total revenue rose by 21% year-over-year to $263 million.
• Despite strong earnings, the stock dropped 7.25% in pre-market trading.
• Subscription revenue saw significant growth, increasing by 39%.
• CommVault ended the quarter with $241 million in cash reserves.

Company Performance

CommVault demonstrated robust growth in the third quarter of 2024, with total revenue climbing 21% to $263 million. The company’s focus on subscription-based services paid off, as subscription revenue surged by 39% to $158 million. This growth was supported by the addition of over 1,000 new subscription customers. The company also reported improvements in annual recurring revenue (ARR), with SaaS ARR jumping 75% in constant currency. InvestingPro data shows CommVault has achieved a remarkable 68% return over the past year, with a strong financial health score of GREAT, indicating solid operational execution.

Financial Highlights

• Revenue: $263 million, up 21% year-over-year
• Subscription revenue: $158 million, up 39% year-over-year
• Total ARR: Increased 21% in constant currency
• SaaS ARR: Increased 75% in constant currency
• Non-GAAP EBIT margins: 20.8%
• Cash reserves: $241 million

Earnings vs. Forecast

CommVault’s actual EPS of $0.94 surpassed the forecast of $0.87 by approximately 8%. This earnings beat reflects the company’s strong operational performance and strategic focus on expanding its subscription services. The revenue of $263 million also exceeded expectations of $245.93 million, marking a significant positive surprise.

Market Reaction

Despite the earnings beat, CommVault’s stock experienced a 7.25% decline in pre-market trading, closing at $146.82. This drop might be attributed to broader market conditions or investor concerns about future growth prospects. The stock remains within its 52-week range of $90.33 to $178.72. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, with multiple valuation metrics, including P/E ratio of 41.6x and Price/Book of 24.3x, suggesting premium pricing. For deeper insights into valuation analysis and more ProTips, consider exploring InvestingPro’s comprehensive research tools.

Outlook & Guidance

Looking ahead, CommVault expects fiscal 2025 total ARR growth of 19-20%, with subscription ARR anticipated to increase by 28-30%. The company is on track to achieve $1 billion in ARR earlier than planned, with total revenue guidance set between $980 million and $985 million.

Executive Commentary

CEO Sanjay Merchandani emphasized the importance of continuous business enablement, stating, "It’s no longer enough to just recover your data. Today, it’s all about enabling continuous business for our customers." CFO Jen DeRico highlighted the company’s strategic execution, noting, "Our cyber resilience message is resonating, our team is executing and our investments are paying off."

Risks and Challenges

• Market Volatility: Fluctuating market conditions could impact stock performance.
• Competitive Pressure: The cyber resilience market is dynamic, with increasing competition.
• Economic Uncertainty: Broader economic factors may affect customer spending and growth.
• Technological Changes: Rapid technological advancements require continuous innovation.
• Regulatory Risks: Compliance with evolving regulations remains a challenge.

Q&A

During the earnings call, analysts focused on the company’s SaaS growth and the impact of the Clumio acquisition, which contributed $24 million in ARR. CommVault executives addressed questions about cross-selling strategies and the potential for multi-product adoption, highlighting the company’s healthy term license renewals expected at 105-110% net revenue retention (NRR).

Full transcript - CommVault Systems Inc (CVLT) Q3 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the CommVault Third Quarter Fiscal Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

I would now like to turn the conference over to Michael Melnick, Head of Investor Relations. You may begin.

Michael Melnick, Head of Investor Relations, CommVault: Good morning, and welcome to our earnings conference call. Before we begin, I’d like to remind you that statements made on today’s call will include forward looking statements about Commvault’s future expectations, plans and prospects. All such forward looking statements are subject to risks, uncertainties and assumptions. Please refer to the cautionary language in today’s earnings release and Commvault’s most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company’s actual results to be materially different from those contemplated in these forward looking statements. Commvault does not assume any obligation to update these statements.

During this call, Commvault’s financial results are presented on a non GAAP basis. A reconciliation between the non GAAP and GAAP measures can be found on our website. Thank you again for joining us. Now I’ll turn it over to our CEO, Sanjay Merchandani, for his opening remarks. Sanjay?

Sanjay Merchandani, CEO, CommVault: Thanks, Mike. Good morning and thank you for joining today’s call. Q3 was another record breaking quarter for Commvault. Total revenue increased 21% to 263,000,000 dollars Subscription revenue grew 39 percent to $158,000,000 Total ARR improved 21% in constant currency. SaaS ARR jumped 75% in constant currency, and we did this profitably recording non GAAP EBIT margins of 20.8%.

At a time where cyber resilience and data security could not be more top of mind for CISOs and IT leaders, we saw a strong uptick in transaction volume, impressive growth in our land and expand business and an acceleration in our organic growth rate. As we look to the future, we believe that Commvault is strategically positioned to succeed and win. This is bolstered by 3 fundamental growth drivers. 1st, the cyber resilience market has never been more dynamic or full of promise. We are uniquely positioned to capitalize on this.

Today, customers face unrelenting cyber attacks, a shifting regulatory landscape and the exponential growth of data from cloud native and AI generated applications. To deal with this, enterprises need a unified resilience platform that spans their hybrid multi cloud environment. This is where Commvault thrives. Our Commvault cloud platform is enterprise grade and enables customers to easily protect and secure vast amounts of data, including AI and ML datasets across clouds. And given most customers are utilizing multiple clouds, we’re innovating across all major providers.

During the quarter, we announced that Commvault Cloud Platform will be available to AWS customers. We also introduced advanced cloud backup and site recovery capabilities for Google (NASDAQ:GOOGL) Workspace. This builds on what we already do today with Microsoft (NASDAQ:MSFT) Azure and Oracle (NYSE:ORCL) Cloud. With respect to cloud, we’re also innovating in unique ways to address critical recovery challenges. For example, one of the most complex and time consuming steps to recover a business after a cyber attack is rebuilding and validating mission critical cloud native applications.

Previously, this could take weeks or months. Today, with Cloud Rewind, which includes technologies from our Aprinix acquisition, customers can do this in a fraction of the time. ARR associated with this offering has more than doubled since we acquired Aprinix a few months ago. Cloud Rewind has become a highly differentiated capability within our platform, which brings us to the second fundamental growth driver, the need for our game changing cyber resilience offering. They’re unlike anything on the market and they make our industry leading platform even stronger.

Today, customers demand predictability, fast recoveries and solutions to address the latest threats. That’s what our next generation offerings do. Security is built in, not bolted on. We’re out innovating the competition on every level. Let me give you an example.

To be truly resilient, you need a predictable recovery plan that can be automated and used at a moment’s notice. And you must be able to practice that recovery in good times so that it can be ready for the bad times. This is what we uniquely provide with ThreatScan and Clean Room Recovery, both our core offerings on our Commvault Cloud platform. With Clean Room, customers love the sense of security provides. Emerson (NYSE:EMR) Electric commented, Clean Room Recovery not only enables organizations to test their recovery plans often, but know that if they’re hit, they can be resilient.

In terms of addressing the latest threats, we’ve just announced that we will be offering customers with a full and automated recovery of Microsoft Active Directory. This is absolutely critical. Active Directory controls authentication and access to critical business systems for 100 of millions of users worldwide. Because it is so essential, it’s also become a primary target for cyber attacks. In fact, research shows it is the target in 9 out of 10 cyber attacks.

If hit, your business will come to a halt. Starting this spring, we plan to address this threat in transformative ways, making it super simple for organizations to recover their entire Active Directory systems. And even better, customers will be able to do this with Commvault Cloud, the same platform that today protects more workloads than any other vendor. Nobody else offers this capability on one platform. Customers are thrilled.

A spokesperson for the Nevada Department of Transportation said, Commvault’s innovation with Active Directory will provide us with the confidence and peace of mind that not only can we recover our Active Directory data, but we’ll be able to do so quickly and accurately. In just 1 year since launching our initial Active Directory capabilities, we’ve seen a meaningful uptick in adoption. With our expanded offering, we’re even more excited about its potential. Another innovation that has customers talking is Clumio Backtrack, which provides a revolutionary way to expedite the recovery of massive Amazon (NASDAQ:AMZN) S3 datasets. Many companies are storing AI and ML datasets in S3, so having the ability to recover that data is paramount.

We unveiled new automation that can rapidly revert billions of objects to a specific version at a specific point in time. Hopi has stopped this. We just announced BackTrack at AWS re:Invent and look forward to sharing more in the coming quarters. These cyber resilience offerings bring even more depth and breadth to our platform. They appeal to CFOs and IT leaders alike, and they lead to the adoption of net new workloads while fueling momentum around land and expand opportunities.

This brings us to our 3rd growth driver, a strong go to market motion combined with an incredible partner ecosystem to scale our business globally. The strategy that we put in place to segment and refine our go to market motion over the last several quarters are paying dividends. Our cyber resilience marketing message is resonating with customers and we’re seeing record inflows and pipeline growth. And in Q3, we saw increased transaction volumes, strong close rates, accelerating customer numbers and robust expansion activity. These contributions were balanced across geographies, verticals and market segments from 7 figure software transactions to a record number of velocity based SaaS wins.

The result was another double digit increase in sales force productivity in Q3. These advances are further augmented by our enhanced and growing partner ecosystem, which enables us to extend our reach globally. In Q3, we saw solid contributions from alliance partners like Hitachi (OTC:HTHIY), HPE, Kyndryl and Dell (NYSE:DELL). This included a large enterprise win with a healthcare provider that combined Commvault’s Hyperscale X on Dell hardware with our Airgap Protect offering for immutable protection of the customers’ most critical data. We also saw improved momentum with the hyperscalers as the number of marketplace transactions more than doubled.

With compliance in mind, we offered a new partnership with Pure and we’re actively working to strengthen integrations with leading AI providers like Databricks. With respect to AI, we’ve prioritized investments in critical AI capabilities that can proactively identify anomalies, detect threats and identify ideal recovery points to bounce back after an attack. These capabilities are pivotal to recovery and resilience. Let me take a moment to summarize the growth drivers that position us for ongoing financial success. 1st, cyber resilience has shaped the addressable market opportunity and the emergence of new use cases has increased the size and accelerated the growth potential of the market.

2nd, in this more complex and dynamic hybrid cloud world, joint products don’t cut it. Our Commvault platform offers customers depth of coverage and breadth of offerings with exceptional choice and flexible consumption. 3rd, maintaining our relentless focus on execution is critical to our success. This flows through all layers within our organization and extends across our growing partner ecosystem. Our year to date financial performance proves that now more than ever, we need to continue these investments to further accelerate our growth profile.

In closing, it’s no longer enough to just recover your data. Today, it’s all about enabling continuous business for our customers from how they prepare for the inevitable disruption to how quickly they get their business up and running following an attack. This is what matters most for a modern hybrid and multi cloud enterprise and it is what we enable today. Now I’ll turn it over to our Chief Financial Officer, Jen DeRico to discuss ourselves. Jen?

Jen DeRico, CFO, CommVault: Thanks, Sanjay. As Sanjay noted, Q3 was another excellent quarter driven by strong execution and record close rates. Our investments in growth oriented initiatives and new product innovations are yielding positive results as demonstrated by the acceleration in our customer additions and our organic growth rate. I want to thank all the vaulters that contributed to the fantastic results this quarter year to date. Now I’ll discuss our Q3 results and operating metrics, followed by an update on our improved guidance for Q4 and FY 2025.

Please note that all growth rates are compared on a year over year basis unless otherwise specified. Total revenue increased 21 percent to $263,000,000 driven by a robust 39% increase in subscription revenue. The growth in subscription revenue resulted from continued SaaS momentum and significant improvement in the volume of both term software and SaaS transactions compared to the prior year. Revenue from term software transactions over $100,000 increased by 18%, benefiting from a 30% rise in volume. This included more than a dozen wins over $1,000,000 In addition, we saw robust growth in landing new large enterprise customers this quarter, including Equinix (NASDAQ:EQIX), AXA, Vanderbilt University Medical (TASE:PMCN) Center and Deniz Bank Financial Services.

Given the breadth and depth of offerings across our platform, we are the vendor of choice to serve large complex enterprises that have mission critical data sitting in on premise, hybrid and cloud environments. I also want to note that our investments around our Velocity Motion continue to bear fruit. We added a record number of SaaS customers this quarter. We’re pleased with this increase in volume with the small and medium sized enterprises as we welcome the opportunity to grow with customers on their hybrid cloud journeys. Now turning to ARR.

Q3 total ARR grew 18% to $890,000,000 On a constant currency basis, total ARR accelerated 21% to $911,000,000 reflecting an acceleration in our organic growth rate as well as incremental contributions from Clumio, which contributed $24,000,000 Please refer to the appendix of our quarterly earnings presentation to review the constant currency bridge. Subscription ARR, which includes term based licenses and SaaS contracts, increased by 29%, reaching $734,000,000 accounting for 83% of total ARR. This includes $259,000,000 in SaaS ARR, which grew 71%, continuing its hyper growth trajectory. On a constant currency basis, subscription ARR increased 32% and SaaS ARR grew 75%. Including Clumio customers, we added over 1,000 new subscription customers, surpassing 11,000 customers worldwide, including over 7,000 SaaS customers.

We continue to benefit from increased multi product adoption among both new and existing customers. For example, we closed a 7 figure transaction with a leading global technology infrastructure company that added risk analysis, threat scan and compliance to bolster their overall cyber resilience posture. A multinational HR and workforce management group chose our Airgap Protect, Cloud Rewind and Active Directory to securely accelerate their hybrid cloud journey. And we closed a 7 figure deal with a national partnership of independent insurance brokers that chose Airgap Protect, VMs and Kubernetes to secure their cloud first infrastructure. These are just a few examples of customers that are bypassing point solutions and top grading vendors to utilize the extensive capabilities of our Commvault cloud platform for enhanced cyber resilience in a hybrid cloud world.

Existing customer expansion remained healthy with a Q3 SaaS net dollar retention rate steady at 127%, driven by both upsell and cross sell. SaaS ARR saw notable growth from new products such as Active Directory, Cloud Rewind, ThreatWise and other mission critical offerings. These trends continue to support our confidence and further expansion opportunities with the newest products we announced at Shift. Now I’ll discuss our consistent profitability and free cash flow, which demonstrates our commitment to a responsible growth philosophy. Q3 gross margins were 82%, reflecting our accelerating mix shift towards SaaS, which represented 29% of total ARR versus just 20% 1 year ago.

Gross margins also reflect modest solution from the Clumio acquisition, consistent with our prior guidance. Operating expenses of $160,000,000 represented 61 percent of total revenue, consistent with prior quarter and prior year. Q3 operating expenses included costs associated with Shift in London, the onboarded Columbia employees and our continued investments to accelerate revenue momentum, which include higher commission and bonuses on record sales results. Non GAAP EBIT grew 17% $1,000,000 and non GAAP EBIT margins of 20.8 percent came in at the high end of our guidance range. Now moving to some key balance sheet and cash flow metrics.

We ended the quarter with no debt and two forty $1,000,000 in cash, which reflects the previously disclosed purchase of Plumeo. We are excited about the progress made towards integrating Plumeo. It furthers our ability to go deeper in the cloud and positions us to capitalize on potential AI related opportunities. As we continue to invest in our future, we remain opportunistic around technologies that further the depth and breadth of our platform. Q3 free cash flow of $30,000,000 was impacted by materials foreign exchange headwinds and tax payments made in the quarter tied to higher than projected full year pre tax income.

In Q3, we repurchased $32,000,000 of stock, representing 107 percent of free cash flow for the quarter. Fiscal year to date through December 31, 2024, we repurchased $135,000,000 of stock, representing 106 percent of free cash flow. We still plan to repurchase at least 75% of our free cash flow for the full fiscal year. Given our strong results year to date combined with accelerating customer demand and a healthy pipeline, we are pleased to share our outlook for fiscal Q4 and once again raise our guidance for fiscal year 2025. For fiscal Q4, we expect subscription revenue, which includes both the software portion of term based licenses and SaaS to be in the range of $160,000,000 to $164,000,000 This represents 35% year over year growth at the midpoint.

We expect total revenue to be in the range of $260,000,000 to $264,000,000 with growth of 18% at the midpoint. At these revenue levels, we expect Q4 consolidated gross margins to be in the range of 81% to 82%. We expect Q4 non GAAP EBIT margins to remain in the range of 20% to 21%. Our projected diluted share count for fiscal Q4 is approximately 45,000,000 shares. We are once again raising our outlook for the full fiscal year 2025.

We now expect fiscal year 2025 total ARR growth of 19% to 20% year over year. We expect subscription ARR to increase in the range of 28% to 30% year over year. From a full year fiscal 2025 revenue perspective, we now expect subscription revenue to be in the range of $575,000,000 to $580,000,000 growing 35% at the midpoint with strong contribution from both term software licenses and SaaS. We now expect total revenue growth to accelerate and be in the range of $980,000,000 to $985,000,000 an increase of approximately 17% at the midpoint. Moving to our updated full year fiscal 2025 margin, EBIT and cash flow outlook.

We continue to expect gross margins to be 81% to 82%. We also continue to expect non GAAP EBIT margins to be in the range of 20% to 21%. From a free cash flow perspective, we expect full year free cash flow of $170,000,000 to $200,000,000 Our revised outlook reflects foreign currency headwinds that were more pronounced in Q3 and expected to continue in Q4. As I reflect on FY 2025, our strong year to date financial performance demonstrates that our strategy is working. Our cyber resilience message is resonating, our team is executing and our investments are paying off.

Looking forward to FY 2026, we are currently trending ahead of the financial targets that we originally shared and we now expect to achieve those targets earlier than our initial plan. As Sanjay noted, we couldn’t be more excited about the market and the opportunity in front of us. The revenue driving investments we are making have positioned us to be the cyber resilience provider of choice for enterprise businesses and have contributed to our outstanding financial performance year to date. We remain committed to investing in these growth driving initiatives to further accelerate our momentum in FY 2026. Now, I will turn it back to the operator to open the line for questions.

Conference Operator: Thank you. We will now begin the question and answer session. And our first question comes from the line of Aaron Rakers with Wells Fargo (NYSE:WFC). Your line is open.

Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for taking the questions and congrats on another solid quarter out of you guys. So I guess, Jen, I’d like to double click a little bit on the momentum you’re seeing in your SaaS customer base. 1,000 new customers seems like a fairly sharp acceleration from the +600 a quarter over these prior two quarters. Maybe you can unpack that a little bit.

How much did Clumio add to that contribution? And then also, can you talk a little bit about how many of your customers have more than one SaaS offering today and how you think about that progression as we look into fiscal 2026?

Jen DeRico, CFO, CommVault: Thanks so much for the question, Aaron. And we’re really proud of our overall performance, in particular, the SaaS acceleration in our organic growth rate. If we think about the number of customers we added about 1,000 as you remarked, subscription customers. I would say to you that of the we were running about 600 in the past run rate. I would say another 200 or so plus or minus come from Clumio and the remainder are all organic.

So we’re really proud of that. And then in addition, as it relates to your second question around number of products, so first of all, I would say we’re really proud of the 127% SaaS NRR. It still remains about 2 thirds upsell, 1 third cross sell. However, I’ve shared in the past that we’re around 30% or so of customers have 2 or more SaaS products. But I would point you to the fact that we’re still have a lot of opportunity, specifically around some of our emerging new products, Active Directory, Cloud Rewind.

Cloud Rewind in particular grew 2x from the time of acquisition. And so while it’s early days for us, we are very, very excited about the potential and believe we have a lot of opportunity to cross sell into the existing base.

Aaron Rakers, Analyst, Wells Fargo: Yes. And then the final question, you mentioned tracking ahead of your fiscal 2026 targets. Can you just remind us what your targets, what you’ve previously outlined were and any context of the progression as we look into fiscal 2026?

Jen DeRico, CFO, CommVault: Great question. So our previous guidance has been $1,000,000,000 ARR and $330,000,000 SaaS ARR by the end of FY 2026. I shared that we are tracking ahead of that. I think the best way to think about our growth is last quarter I shared that we were on average adding about $30,000,000 in net new ARR a quarter. This past quarter, we added $38,000,000 net new ARR on an organic basis, again, on a constant currency basis.

So I think that’s the best way to think about how we’re tracking on the future.

Aaron Rakers, Analyst, Wells Fargo: Yes. Thank you.

Param Singh, Analyst, Oppenheimer: Yes.

Conference Operator: Our next question comes from the line of Eric Heath with KeyBanc Capital Markets. Your line is open.

Eric Heath, Analyst, KeyBanc Capital Markets: Hey, thanks for taking the question and glad to be on the call with you guys today. So Sanjay, maybe just a big picture question. I would love to get some of your perspective on this acceleration in the business. Just curious how much of the acceleration do you think is from external factors that might be happening in the marketplace, whether it’s mergers or regulation versus better internal execution?

Sanjay Merchandani, CEO, CommVault: So I think the way we look at it is we do one thing for our customers day in and day out, which is make them more resilient, given the ability to recover in the face of an attack or any kind of catastrophic situation. So we’re ransomware attacks, cyber attacks are not going down. They’re actually increasing. And what we’re doing is continue to build out our platform, Commvault Cloud, that enables customers in a hybrid multi cloud world to be able to protect any workload anywhere and be able to recover it in a very predictable way. So our innovation in the platform is definitely a tailwind, a driver of the growth we’re seeing.

And we’re solving a really hard problem for our customers. Combine that with over the past 3 to 4 quarters, we’ve been quite open and transparent about the way we’re aligning our go to market resources, driving efficiency productivity across it, getting closer to our customers with our customer success team. I think all of that is beginning to take great shape and come together well for us. So it’s a combination of solving a hard problem with a good platform and executing to the best of our ability. Platform and executing to the best of our ability.

Thanks for that. And Jen, question for

Eric Heath, Analyst, KeyBanc Capital Markets: you to follow-up on some of the net new ARR comments and hopefully it doesn’t get too much in the weeds, but curious if there’s anything to call out as it relates to the 3Q and 4Q seasonality because when I look at the 3Q net new ARR on a constant currency organic basis, it was similar to the prior two quarters and the 4Q guidance seems like it implies similar net new ARR on a constant currency basis as 3Q. So just curious if there’s any reason why that seasonality should be the case when I usually think of the second half being a bit stronger with a bigger renewal base. So kind of a lot to maybe unpack there, but

Sanjay Merchandani, CEO, CommVault: just any color or anything to call out

Eric Heath, Analyst, KeyBanc Capital Markets: as it relates to seasonality?

Jen DeRico, CFO, CommVault: Yes, absolutely. So I would say overall, the second half of the year, like you shared, is usually it’s historically and seasonally stronger than the first. Q3 had an additional a little bit of a higher renewal population. However, on average, as we think about Q4, our guidance focuses on the fact that we have strong pipeline and field execution. We’re continuing to see continued momentum in both our land and expand.

And our security offerings are continuing to gain a lot of traction. And then the last thing I would call out is there’s really from a or just an organic, it’s mostly organic growth, only let’s say a point or 2 from Clumio. And I think the best way to look at the overall seasonal nature is to take a look at how our ARR continues to grow because it really helps neutralize any seasonality.

Eric Heath, Analyst, KeyBanc Capital Markets: Okay. Thanks and congrats again on the organic acceleration.

Jen DeRico, CFO, CommVault: Thank you very much.

Conference Operator: Next (LON:NXT) question from Jason Ader with William Blair. Your line is open.

Jason Ader, Analyst, William Blair: Yes, thanks guys. Really impressive revenue growth. I guess my question is when do you expect to see more operating leverage? And maybe just some of the puts and takes as you think about the outlook for operating margin?

Jen DeRico, CFO, CommVault: Thanks for the question. So first of all, I think we’ve shared in the past that FY 2025 was absolutely a year of investments to accelerate market accelerate our revenue growth and you’re absolutely seeing that in our results, 5 quarters of double digit growth. This quarter, I’ll walk through a little bit of where the investments went with the increased revenue acceleration. At the first, you’re seeing more stats in our revenue profile. And as we’ve shared before, that has a more diluted margin than overall term software license.

2nd of all, we had Clumio in that mix as well and we shared the last quarter, it would be diluted for 2 to 3 quarters. The third is the fact that we’ve seen massive over performance in our revenue results and that’s related to the fact and so you’ll see additional commission and bonuses in the sales and marketing line. And then 4th, ultimately, we’re continuing to invest like I said. But if I zoom out, year to date, we’re at a rule of 39, this quarter a rule of 42. So overall, we’re really pleased with the performance.

Jason Ader, Analyst, William Blair: Okay. Thank you. And then one quick follow-up. Just did you say what the revenue contribution was from acquisitions? I didn’t catch that.

Jen DeRico, CFO, CommVault: So we shared that Clumio was $24,000,000 of ARR. So if you think about that, it’s approximately $6,000,000 from a revenue perspective in quarter.

Jason Ader, Analyst, William Blair: Is there any other impact from acquisitions?

Jen DeRico, CFO, CommVault: Our credit was not meaningful at that point.

Jason Ader, Analyst, William Blair: Great. Thank you. Good luck.

Jen DeRico, CFO, CommVault: Yes, of course.

Conference Operator: Our next question comes from the line of Param Singh with Oppenheimer. Your line is open.

Param Singh, Analyst, Oppenheimer: Yes. Hi. Thank you and thanks for taking my question. I really want to kind of dive a little bit more into the SaaS, particularly with on the cybersecurity offerings that you’re putting out now. What percentage of customers or what number of modules are your SaaS customers using anything on the security side?

Have you seen an acceleration on that front? And I had a follow-up on that in that regard.

Sanjay Merchandani, CEO, CommVault: Hey, Param, Sanjay. Thanks for the questions. The platform is built to deliver what we call built in security and now bolted on security. And customers so the platform in itself enhances the customer security profile and resilience greatly. Just as a benchmark, we’re also the only provider that is FedRAMP High certified for that has gone through the stringent process of FedRAMP High.

So the platform in and of itself is a very secure platform for our customers. It just raises their profile. If you look at the capabilities we’re building in, in and off itself features like Clean Room, which is about recovery, Active Directory, which is about recovery, okay, and making you more secure. Our AGP or Air Gap Protect, which is our immutable capabilities on which they can customers can write important data and or other things that they want to keep secure. So all of those features as examples give you more security.

The ability with BackTrack of Ploomio acquisition to roll back millions of objects in S3 and make you in the advent of an attack, all of this makes you more secure and security from the lens of being able to come back to life, recover. So the platform in and of itself is highly secure and certified and we build great capabilities into the technology, the innovations we do that give customers optionality on board. Just to just and I’ll close by saying we just announced a integration with CrowdStrike (NASDAQ:CRWD)’s Falcon platform, which allows us to, for example, take feeds from CrowdStrike, show it in ConvoCloud and then enable actions automatically if needed to either restore, move data out, do a scan, whatever action the customer wishes to take based on intelligence that we gather from our partners. So as you can tell the platform, we like to think of the platform as being implicitly secure with added dimensions of capabilities that we give customers options

Param Singh, Analyst, Oppenheimer: on. Got it. So if I were to put that in the context of module expansion and overall SaaS, is there some way to think about it? Are there additional modules that you intend to bring on either organically or potentially with M and A that would be a natural evolution of the platform? In terms of module expansion, right, you talked about 1 or 2 SaaS modules.

Margins. I’m sorry, I’m sorry. I wanted to understand, A, in terms of module expansion, right, you talked about 1 or 2 SaaS modules. I’m thinking, A, in terms of security modules that could be added on, A, organically or B, if you have any gaps with M and A that would be interesting to expand the platform.

Sanjay Merchandani, CEO, CommVault: I think what we have today is second to none. Honestly, the pickup we’re getting on our clean room capabilities, which we innovated around, Active Directory, which we just announced an enhancement to that I think is going to be amazing for customers to feel more secure in cyber attacks. Our acquisitions through Pranix with ReWIND, we call the product ReWIND now, and the ability to bring back to life cloud native applications, configurations, data, all of it, and backtrack, which I talked about a little earlier, all of these are accretive. All of these are choices customers have in a very logical way in the platform to grow their resilience profile, okay? So it’s not about 1 or the other.

It’s a natural extension of their ability to be and their desire to be more resilient as they mature in their journey.

Param Singh, Analyst, Oppenheimer: Got it. Thanks a lot, Sung Ji. I’ll get back in line.

Sanjay Merchandani, CEO, CommVault: Thank you, Bhartan.

Conference Operator: Next question comes from the line of Rudy Kessinger with D. A. Davidson. Your line is open.

Rudy Kessinger, Analyst, D.A. Davidson: Hey, guys. Thanks for taking my questions. Again, I’ll have my congrats on the quarter that the organic ARR growth acceleration

Param Singh, Analyst, Oppenheimer: is

Rudy Kessinger, Analyst, D.A. Davidson: very impressive, the rule of 40 improvement, etcetera. So very nice numbers here. I want to go back to maybe a question I was asked earlier. I know you said, I think maybe 30% of your customers have 2 plus SaaS product. I guess, but differently, I’m curious when you look over your entire subscription customer base, just what percent of the data backup and recovery estate have you captured at this point?

Like how much cross sell and up sell room is there, not just on SaaS, but on term license as well that continue to expand with those existing customers?

Sanjay Merchandani, CEO, CommVault: Without giving too much away, Rudy, because this is a competitive space. This is a competitive area for us. As Jen mentioned, cross sell is a massive opportunity for us. The offering that we’ve released, let’s say, just in the last 12 months and the pipeline that we have coming out over the next 6 to 12 months gives us an unprecedented opportunity to go in and very seamlessly give customers access to all of that, all these new feature sets inside of the platform. So whether the customer is using software predominantly and a little bit of SaaS or using landed with us with SaaS, I was looking at some of our more data center capabilities.

Our platform is designed for hybrid multi cloud scenarios and we do it broader and deeper than anyone else. So short answer without giving too much away is everything we’re building aligns very well with the way the customer grows their resilience profile with us, okay, on the Commvault Cloud platform. So, if you take it apart, you’ll see how these offers are tightly integrated and quite seamless in their in the way for customers to embrace and roll out.

Rudy Kessinger, Analyst, D.A. Davidson: Okay. And then, Jen, really appreciate these constant currency disclosures. I guess in your revised fiscal 2025 ARR growth guidance of 19% to 20%, what is that at constant currency?

Jen DeRico, CFO, CommVault: So I think the best way to think about overall the ARR acceleration is if I go back to the $30,000,000 that we said quarter over quarter is the best way to think about that. And ultimately, the guidance is based off of this quarter’s FX.

Sanjay Merchandani, CEO, CommVault: Okay, got it.

Rudy Kessinger, Analyst, D.A. Davidson: Thank you.

Conference Operator: Next question comes from the line of Howard Ma with Guggenheim Securities. Your line is open.

Howard Ma, Analyst, Guggenheim Securities: Great. Thank you. And I want to add my congratulations as well on a strong quarter. I have one for Sanjay, one for Jen. So for Sanjay, what and it’s related to it’s like a subset of the prior question.

What is your sense of the greenfield opportunity for protecting SaaS apps and cloud native workloads? So that’s really on the cloud side specifically that are not already protected by a third party vendor. And as it relates to Commvault, as Commvault continue to expand your breadth of offerings and it’s really been impressive to Google Workspace, Active Directory, Pranix, Clumio. Could this do you think are you guys is one scenario that you guys could accelerate SaaS net new ARR going forward?

Sanjay Merchandani, CEO, CommVault: Yes. Short answer is yes. Howard, I absolutely believe that. We are so focused on being a true hybrid multi cloud provider for our customers that there’s no workload and no cloud left behind. We’re doing it as much as we can to really broaden our offerings on the cloud and then go as deep as we can with all the cloud.

This quarter we announced much deeper partnerships with AWS. The Twumio acquisition furthered our capabilities with S3 on AWS. Google Workspace more recently on the app side. So and we’ve always supported Azure at great length alongside OCI. So our it’s no secret.

We believe that the more we have both depth and breadth for cloud native offerings, cloud first offerings to our customers, the safer they are. A lot of customers actually cloud data is the one that’s left exposed that customers move to the cloud, get more sophisticated in their offerings, go beyond snapshots, offerings like our rewind, which was the Pranix acquisition and it’s hard, really allow customers to not only in a single play either protect the application, the data, the prioritization of the resources, the configuration and then be able to test and bring it back at will across clouds. So there’s a lot we’ve built and there’s a lot we continue to build in there. BackTrack, for example, the ability to bring back billions of objects to a prior version in a fraction of the time it would take you to even fathom what happened is these are all groundbreaking capabilities all cloud first. And we’ll continue to drive that and make it seamlessly available through the platform to even our software based customers.

The customers that are still primarily in their own data centers can avail of these capabilities seamlessly through the through Compile Cloud and continue to grow with us, whether it be Office 365, Airgap storage, clean room capabilities, active directory, seamless.

Howard Ma, Analyst, Guggenheim Securities: That’s really good color, Sanjay, and it’s very encouraging. In our own checks, people have told us that the Upanix and Ploomio Technologies are pretty unique. I said I had a follow-up for Jen. It’s actually it’s related to Rudy’s second question, too. I promise we did not have brainstorm before this.

I also want to ask the FX, the totally our FX question in other way because if you look at Q2, the Q2, I believe the impact was a 1 point tailwind, right? And then in Q3, you just disclosed it’s a 3 point headwind, so that’s like a 4 point swing. And so is the right way to think about the total AR guide, the raise, maybe it’s more like a 4 to 5 point raise instead of 1 to 2 reported? I don’t know if that’s the right I don’t know if I’m doing the math right or wrong there.

Jen DeRico, CFO, CommVault: Yes, I think you’re definitely in the ballpark, but I would just go I would encourage you to go back to the appendix in the Investor Relations presentation where we say, like you said, in prior quarter, the organic on a constant currency basis net new era was 37 and then this quarter 38. And so I think overall the 30 plus or minus is the right way to think about the continued growth.

Howard Ma, Analyst, Guggenheim Securities: Sorry, one last thing, Jen. Does that 38, does that include Clumio or is that organic constant currency or is that constant currency?

Jen DeRico, CFO, CommVault: That’s truly organic net new ARR at constant currency. In addition to the $38,000,000 we added $24,000,000 from Clumio.

Howard Ma, Analyst, Guggenheim Securities: Okay, got it. Thanks so much for clarity.

Jen DeRico, CFO, CommVault: You’re very welcome.

Conference Operator: Next question comes from the line of James Fish with Piper Sandler. Your line is open.

Michael Melnick, Head of Investor Relations, CommVault0: Hey, guys. You guys have seen much consolidation in calendar 2024 in the space, including a few deals yourselves. If Sanjay for you, how are you thinking about the opportunity for further consolidation? And Jen on your side, not to continue to talk about this, but if I take Clumio and given the disclosures around the Pranix in the filings and factoring the FX changes, we’re getting closer to 17% organic constant currency growth, which is actually similar to the last few quarters. Is that the right way to really think about sustainable growth for the business, especially as you’re talking about the $1,000,000,000 target being achieved earlier than expected?

Sanjay Merchandani, CEO, CommVault: Hey, I’ll go first. I’ll go first, Jim. Your question around consolidation, do we say how do I think about further consolidation? I mean, if you we’re looking forward and when we look forward on the platform, there are areas that we definitely think whether it be AI based datasets, AI application backup, large data lakes. They’re going to require very different technologies to protect and be resilient with than something we did 5 years ago or even 3 years ago or something we did with Kubernetes 3 years ago.

So one size doesn’t fit all. And as much as our innovation engine is on fire, there are some good technologies out there like Lumio, like Pyramax that actually make bring incredible value to our customers very quickly. I also believe that in this business and we’re seeing a lot of focus on in our space now. We were the only player in the public markets for a long, long time. And what we learned, if we learned anything, was clearly single workloads don’t win.

You need breadth and depth of workloads and environments to really be valuable to customers because that’s how you protect. You can’t have partial. You need to be completely covered and completely resilient. So we think that if there is that’s going to be key too. And we’re very happy with the acquisitions we’ve made.

The Afrinx, in a few months, we’ve doubled the revenue, the contribution from that. And with Clumio, everything we’ve seen is great and the pipeline is growing.

Jen DeRico, CFO, CommVault: Thanks, Sanjay. And then, Jim, to your second question. First of all, I would highlight the fact that, yes, you’re right. The our FY 2020 5 results includes not only our organic performance and a few points from Clumio. And so we sit at between 17% or 18% on an organic growth rate.

As you think about going forward, I think 15% ARR growth year over year is not a bad place for you to be as we think about just overall our organic continued contribution.

Sanjay Merchandani, CEO, CommVault: We’ll have more. That’s helpful.

Jen DeRico, CFO, CommVault: And we’ll share more in the next quarter.

Michael Melnick, Head of Investor Relations, CommVault0: Sounds good. Sanjay, just circling back, some concerns. Obviously, we’re talking about IT budgets for 2025 here, but there’s some concerns around how Europe looks. So how should we think about the growth in Europe this year versus last, especially in light of a lot of those entities having to go through the DORA regulation this past month?

Sanjay Merchandani, CEO, CommVault: Yes. I mean DORA has been coming for a while. So we’ve been working with customers for not this quarter, we didn’t start this quarter. We’ve been working for a while to really make sure that they were ready for the compliance that they had to do as an example. And all over the world there’s different regulation that customers have to abide by.

We had if you looked at our business this past quarter, it was quite evenly spread between Americas and international. Europe actually had a pretty good quarter for us this last quarter. And without getting too much into 2020, our fiscal year 2020 6 and the rest of calendar year 2025, we’re looking we’re not looking at any substantial changes between our assumptions so far.

Conference Operator: Next question comes from the line of Thomas Leahy with Cantor Fitzgerald. Your line is open.

Michael Melnick, Head of Investor Relations, CommVault1: Hey guys, thanks for squeezing me in here. Great quarter. My question is on term license. My first question is on term license. I just wanted to double click on that.

Sanjay, if you could, like what are you seeing in terms of renewal conversations? How are those going? And specifically want to know about the color related to expansion. You called out expansion. Obviously, it’s working with on the SaaS side.

But on the term license side specifically, how is cyber kind of helping with term license renewals? How does the renewal pipeline look? And in the past, like capacity has been the main driver here, kind of 105%, 110% NRR. What can we expect here and what are you kind of seeing in the near term? I have a follow-up.

Jen DeRico, CFO, CommVault: So I’ll start and just let you know that on a software term license Q3 was very, very strong for us. We continue to see strong inflows. Q3 has historically been a strong renewal type quarter for us and that continues to be the case. And overall from an NRR perspective that 105% to 110% is still absolutely the right ballpark.

Sanjay Merchandani, CEO, CommVault: Yes. And more qualitatively, what we’ve done is this year we’ve built out a customer success organization that is working very closely with our customer base on making sure that they are resilient, that they have the latest and greatest technology, they’re enabled and that we’re working closely with them to make sure that the best of what we have, they have access to. So that’s helping really with the conversations around renewals, pipeline around renewals. Our newer offerings are very especially the ones that give them Airgap Protect, because our immutable storage gives them active directory protection. These are very accessible and important add ons that enable the cycle.

So far as Jen said, quantitatively, our renewals last quarter, that’s all we could talk about, were super healthy and we think they’re going to be they’re going to continue to be a solid business for us.

Michael Melnick, Head of Investor Relations, CommVault1: And just to qualify there or summarize there before I get to the second question, with all the new product and packaging that Gary is working on, all the new cyber products. On the term license side specifically, can we expect kind of maybe that 105,110 to expand going forward without offering guidance and just to get them wondering qualitatively from your conversations? Sanjay?

Jen DeRico, CFO, CommVault: Yes. I think I’ll step in here. I think the best way to think about our overall NRR for software is still in the 105% to 110%. What I would point you to is the opportunity to support our both hybrid workloads and our SaaS NRR of 127% and the opportunity to continue to push our cross sell motion.

Michael Melnick, Head of Investor Relations, CommVault1: Yes. That’s super impressive and thank you for that, Jenna. Follow-up question is on margins like everybody else has been harping on. I just wanted to say, if we kind of look out 1st and foremost, what was the Clumio kind of headwind on maybe operating margin here in the current and next quarter, especially the next quarter that we’re in now? And if you look out kind of fiscal 20 26, Jennifer, how are you balancing growth and operating leverage there with all the moving parts there?

That’d be helpful. And thank you again. Great quarter.

Jen DeRico, CFO, CommVault: Great question. So first, I’ll answer the question around Clumio. We said it would be dilutive for a couple of quarters, 2 or 3 quarters. I would say a point or 2 is the right way to think about dilution on the margin side of things. But if I zoom out and think about continued investment, you heard both Sanjay and I talk about the fact that the market is absolutely growing for cyber resiliency products.

The demand for our Commvault cloud products absolutely resonating. We continue to see robust demand from our customers. And also we see a really strong execution from our own team, increased close rates, double digit productivity. All that to say that when we are in a decision, we win the majority of the time. And so as we think about FY 2026 investments, of course, we will be balanced.

But at the same time, we know that we want to be in incrementally even more decisions, because we know the market it’s the right time for us to continue to capture market share.

Sanjay Merchandani, CEO, CommVault: And at the risk of repeating ourselves, we’re clipping the rule of 40 consistently. And that’s it’s we’re very proud of that because as much as we we’re growing 21% on the top line, margins still are very, very healthy and we’re making balanced investments. We’ve always had responsible growth and we’re continuing with that trajectory.

Michael Melnick, Head of Investor Relations, CommVault1: Very impressive. Thank you.

Sanjay Merchandani, CEO, CommVault: Thank you.

Conference Operator: And our last question comes from the line of Aaron Rakers with Wells Fargo. Your line is open.

Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for the follow-up. I wanted to go just on a partner ecosystem. You mentioned obviously this last quarter announcing engagement with AWS with Commvault Cloud Platform. You also referenced Microsoft Active Directory.

I’m curious as you think about these opportunities, Sanjay, does it take a while to see these start to come to fruition as far as revenue incremental revenue opportunities? Or do you think that we should be considering that as an incremental driver already starting in this current and maybe into the June quarter? I’m just curious how you think about the ramp of those opportunities?

Sanjay Merchandani, CEO, CommVault: It takes time. It takes time because you build it, you’ve got to make sure that the customer understands it, it fits into their buy cycle. So it does take a little bit of time. Some go faster than others. We’ve been very pleased with Active Directory as an example.

That one has a lot of quick wins, customers see the value, they’re able to put it into place quickly, it’s the right price point. So for some, it’s a lot easier as a workload to absorb. We think our it took us a lot to get it all done, but Google Workspace also, that’s one where I think there’s that was built out of customer demand. And so all of this, I think, has a ramp. Nothing happens overnight.

It has a ramp. And one of the other things that we’re also investing that that’s sort of that’s important because accessibility for customers, ease of use in deploying marketplaces, hyperscale marketplaces, so whether it’s the Microsoft marketplace or the AWS marketplace, supporting those also enables us to be able to get the product into the hands of customers faster because it’s a natural way for them to acquire.

Aaron Rakers, Analyst, Wells Fargo: Yes. And then as a quick follow-up, just characterization of the competitive landscape, who do you see the most and who do you see as the kind of opportunity set that you’re able to displace?

Sanjay Merchandani, CEO, CommVault: So we have been very clear that what we focus on is resilience. And resilience equates to the customers’ ability to recover their business, their continuous capabilities, their connected businesses. We do that in a scalable way within a hybrid multi cloud enterprise. This I don’t people do big parts of that, they don’t do everything we do with the scale we do with that, which is why we’ve been here in the public markets since 2006, very clearly good at what we do. We have a lot of under patents in that space.

So we take that innovation and we take that the way we bring things to market very seriously. So being group, the backtrack, these sort of technologies, I don’t think are available with our competitors. So our job is FedRAMP high. We’re the only ones who have that certification. These are the kinds of things that make us very different and valuable, I believe, to our customers.

So we’re going to keep going that route. We’re going to keep separating ourselves with great innovation. And we look we’re kind of excited about the future. Thank you.

Conference Operator: That concludes the question and answer session. I would like to turn the call back over to Mr. Melnick for closing remarks.

Michael Melnick, Head of Investor Relations, CommVault: Thanks. Thank you everyone for joining this morning. As a reminder, you can look at our earnings presentation available on the Investor Relations website to get a constant currency bridge and we’ll be available for questions and feel free to reach out. Thank you again.

Conference Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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