Earnings call transcript: CommVault’s Q1 2026 earnings beat expectations

CommVault Systems Inc. (CVLT) reported stronger-than-expected financial results for its first fiscal quarter of 2026, showing a notable earnings per share (EPS) and revenue beat. The company reported an EPS of $1.01, surpassing the forecast of $0.97, while revenue reached $282 million, exceeding expectations of $267.84 million. Following the announcement, CommVault’s stock surged 14.58% in pre-market trading. According to InvestingPro data, the stock is currently trading near its 52-week high of $192.01, with an impressive year-to-date return of 8.3%.

Key Takeaways

• CommVault’s EPS of $1.01 exceeded the forecast by 4.12%.
• Revenue of $282 million surpassed expectations by 5.28%.
• Stock price increased by 14.58% in pre-market trading.
• Total annual recurring revenue (ARR) grew by 24% to $996 million.
• Raised full-year revenue guidance to a 17% growth target.

Company Performance

CommVault demonstrated robust performance in Q1 2026, with significant growth in subscription and total ARR. The company capitalized on the increasing demand for cyber resilience and multi-cloud data protection solutions, positioning itself as a leader in the sector. Its strategic initiatives, including the acquisition of Satori Cyber and new product introductions, have strengthened its competitive edge.

Financial Highlights

• Revenue: $282 million, up 26% YoY
• EPS: $1.01, up from the forecast of $0.97
• Total ARR: $996 million, up 24%
• Subscription ARR: $844 million, up 33%
• Free cash flow: $30 million

Earnings vs. Forecast

CommVault’s Q1 2026 earnings exceeded analyst expectations, with an EPS surprise of 4.12% and revenue surprise of 5.28%. This marks a positive deviation from previous quarters, highlighting the company’s ability to outperform market forecasts consistently.

Market Reaction

In response to the earnings beat, CommVault’s stock price jumped by 14.58% in pre-market trading, reaching $178.88. This movement reflects investor confidence in the company’s strategic direction and financial health. The stock is now approaching its 52-week high of $192.01, indicating strong market sentiment.

Outlook & Guidance

CommVault raised its full-year total ARR growth guidance to 18% and expects subscription ARR growth of 24%. The company projects total revenue for fiscal year 2026 to be between $1.161 billion and $1.165 billion, representing a 17% increase. Non-GAAP EBIT margins are anticipated to be approximately 20.5%, with free cash flow expected between $210 million and $215 million. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading at premium valuations, with notably high P/E and EBITDA multiples. Subscribers can access 10+ additional ProTips and comprehensive valuation metrics in the Pro Research Report.

Executive Commentary

CEO Sanjay Merchandani emphasized the company’s leadership in cyber resilience, stating, "We have an industry-leading cyber resilience platform, an aggressive AI-minded innovation roadmap." CFO Jen Derico added, "Customers want our full platform, and our SaaS platform absolutely meets the moment," highlighting the company’s strategic alignment with market needs.

Risks and Challenges

• Increasing competition in the cyber resilience and data protection markets.
• Potential integration challenges with the Satori Cyber acquisition.
• Macroeconomic pressures that could impact customer spending.
• Rapid technological changes requiring continuous innovation.
• Dependence on strategic partnerships for growth.

Q&A

During the earnings call, analysts inquired about the strategic importance of the Satori Cyber acquisition and its impact on future growth. The management also addressed questions on cross-sell and upsell opportunities, affirming strong performance in the federal market and dismissing concerns of budget pull-forward. With a market capitalization of $8.32 billion and analyst consensus showing further upside potential, CommVault demonstrates strong momentum. For detailed analysis of growth prospects and comprehensive financial metrics, explore the full CommVault Research Report on InvestingPro.

Full transcript - CommVault Systems Inc (CVLT) Q1 2026:

Conference Operator, 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 First Quarter Fiscal Year twenty twenty six 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 Mike Melnyk, Head of Investor Relations. You may begin.

Mike Melnyk, 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. 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: Good morning, and thank you for joining today’s call. Commvault had a tremendous start to our fiscal year. Some highlights in the quarter include total ARR grew 24% to $996,000,000. Subscription ARR grew 33% to $844,000,000. Total revenue grew 26% to $282,000,000.

Subscription revenue increased 46% to $182,000,000 and we achieved 47 on a rule of 40 basis. Our execution has never been better across the business. We continue to see hyper growth with our SaaS platform. SaaS ARR soared 63% to $3.00 7,000,000, and in Q1, we surpassed 8,000 customers. And we’re set to surpass our $330,000,000 ARR target well ahead of schedule.

Those stats also speak to our overall land and expand business. In fact, in q one, across software and SaaS, we had our best land and expand quarter ever. A few notable wins include Honeywell, Equifax, U Haul, NTT Data Services, and Insurance Group, Chaucer Lloyd’s. Additionally, we’ve seen tremendous success in emerging routes to market, including cloud marketplaces. During the quarter, we achieved triple digit growth in marketplace transactions with multiple 6 figure and 7 figure deals.

And lastly, in terms of execution, we posted healthy growth across geographies, industries, and customer segments, from enterprise to SMB. Jen will share more details about this later. None of this would have been possible without the trust of our customers and partners, and the hard work and dedication of our team members globally. Thank you all. The strength we demonstrated in Q1 provides us with a solid foundation for the rest of the fiscal year.

As we reported in previous quarters, there are three critical drivers that continue to underpin our long term sustainable growth. First, the cyber resilience market is booming. As CIOs and CISOs alike strive to keep their businesses operating continuously in a world of relentless threat and attacks. Commvault is front and center in this market, and we continue to see healthy growth in our engagement with CSOs. Commvault’s offerings uniquely fill the preparedness gap that security and IT teams are so concerned about today.

CISOs can enhance resilience by proactively assessing risks, scenario planning, and running simulations as part of our platform. That’s what we do, and we do it better than anyone else. Case in point, we continue to see growth with our clean room recovery offering that enables customers to test their resiliency in good times, so they’re prepared for the hard times. In q one, a government institution in The Middle East chose Commvault Cloud and Clean Room Recovery to regularly test their cyber preparedness. The customer also added Airgas Protect, Active Directory, and Cloud Rewind for enhanced security and rapid recovery following an outage of cyber attack.

This quarter, we brought cyber preparedness to a new level with the introduction of Recovery Rage. This hands on in person experience enables security and IT teams to simulate the pressure of real world attacks in a setting that models their own production environment. Unlike other simulations, defenders can practice their responses, recovery, and put their preparedness skills to the test. Our second critical market driver is the breadth of our partner ecosystem. Q1 was a phenomenal quarter for Commvault in terms of extending our reach of partners.

In addition to doubling down on cloud marketplaces, we announced major partnerships across the ecosystem. We formed a strategic alliance with Deloitte to help enterprises around the world fortify the defenses and swiftly recover from outages and cyber attacks. We took our partnership with CrowdStrike to the next level, announcing an expanded collaboration that brings together their elite incident response services with our industry leading recovery expertise. These services help customers improve readiness, respond faster, and achieve cleaner recoveries. From the main stage HPE Discover Conference, HPE and Commvault announced a strategic partnership to deliver advanced cyber resilience, data protection, and disaster recovery capabilities for enterprise hybrid cloud environments.

Lastly, in partnership with Kindrel, we announced incident recovery services. This holistic solution helps customers mitigate risk, avoid the high cost of downtime and regulatory fines, improve cyber resilience, and enable continuous business in the face of cyber threats. And finally, our third driver is our market leading innovation, which continues to receive major accolades. For the fourteenth consecutive time, Commvault was named a leader in the Gartner Magic Quadrant for backup and data protection platforms. In Gartner’s critical capabilities reports, we were ranked number one in five out of six use cases, including multi cloud and SaaS.

And we received the highest rating for the AI and ML critical capability. Additionally, this year, Gartner recognized Commvault as a sample vendor in the Gartner 2025 hype cycle for data security technologies. In Q1, Commvault also won the outstanding cyber resilience award from Cyber Defense Magazine. We will continue to innovate so our customers can address their most critical resilience challenges. Protecting AI data is part of that.

At the Gartner Security and Risk Management Summit in June, analysts reported by 2028, 25 percent of enterprise breaches will be traced back to AI agent abuse from both external and malicious internal actors. To directly address threats posed by AI and to further advance data security, Commvault recently announced its intent to acquire Satori Cyber, a data and AI security company. This strategic acquisition will add powerful capabilities that strengthen Commvault’s data security offerings, and empower customers to use AI in a better governed and more responsible way. The transaction is expected to close later this quarter, so we’ll share more on our next earnings call. The bottom line, we have an industry leading cyber resilience platform, an aggressive AI minded innovation roadmap, and the proven execution customers rely on to keep their businesses uninterrupted.

We hope you can join us in New York City at Commvault Shift on November, as we usher in a whole new era of cloud native and cyber resilience readiness. Now, I’ll turn it over to our Chief Financial Officer, Jen Derico, to discuss our results.

Jen Derico, CFO, Commvault: Thanks Sanjay. As Sanjay mentioned, we delivered a strong start to the fiscal year. The momentum in the cyber resilience market remains strong. Our brand message continues to gain traction. Customer demand is increasing and our team is effectively leveraging a record number of opportunities.

I would like to express my gratitude to all the Valters whose efforts contributed to our outstanding first quarter results, positioning us for continued success throughout the fiscal year. Now I’ll discuss our Q1 results and operating metrics, followed by a discussion of guidance for Q2 and FY 2026. Please note that all growth rates are on a year over year basis unless otherwise specified. Total annual recurring revenue increased by 24% to $996,000,000 on a reported basis. On a constant currency basis, applying March 31 FX rates, organic net new ARR grew by $40,000,000 quarter over quarter, a new quarterly record.

For a comparison of FX adjusted ARR with previous quarters, please refer to our earnings presentation. Subscription ARR grew 33 to $844,000,000 representing 30% growth on a constant currency basis. This was led by an impressive 63% increase in SaaS ARR to $3.00 $7,000,000 or 60% growth in constant currency. Subscription ARR now constitutes 85% of total ARR compared to seventy nine percent one year ago. As a reminder, we view subscription ARR as the best indicator of the company’s growth profile.

Now I’ll discuss Q1 revenue trends. Total revenue increased by 26% to $282,000,000 driven by 46% rise in subscription revenue. This growth was supported by an exceptionally strong land and expand quarter for both term software and SaaS with gains across regions, industries and transaction sizes, including a significant increase in software transactions exceeding $1,000,000 Revenue from term software transactions exceeding $100,000 increased by 39%, reflecting robust growth in both transaction volume and average deal size. Also, we acquired approximately 700 net new subscription customers and total subscription customers are now approaching 13,000. Customer expansion remained robust with Q1 SaaS net dollar retention of 125 as a result of both successful upsell and cross sell initiatives.

Our leading solutions, M365 and AirGap Protect continued to achieve double digit quarter over quarter growth, complemented by substantial contributions from new products that support customers’ business continuity strategies, such as Clean Room and Active Directory. During the quarter, we worked closely with a North American aerospace company to modernize its cyber resilience strategy, while remaining audit ready for FAA and aircraft manufacturer compliance. The customer implemented Commvault’s Autonomous Recovery, Air Gap Protect, and Active Directory to back up their critical data and support their regulatory requirements. The number of SaaS customers utilizing two or more products increased by 45%. As Sanjay highlighted, SaaS continues to be the preferred route to market for many customers.

In this quarter, we observed exponential growth through the hyperscaler marketplaces. Another positive development is the 70% increase in customers generating over $100,000 in SaaS ARR during Q1. These larger SaaS customers now constitute more than 30% of our SaaS customer base. Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multi product adoption than our overall SaaS base. For example, a Fortune 500 life insurance company adopted Commvault after experiencing limitations with native tools for cloud application protection and recovery.

The organization standardized M365, files and objects, and VMs on Commvault Cloud, resulting in the elimination of silos and changes in recovery time. With the implementation of AirGap Protect, Active Directory, and Cloud Rewind, the company adjusted its data security approach, addressed compliance requirements, and enhance the process of environment rebuilds. This example underscores the long term monetization potential of our platform. As I mentioned in previous calls, we will continue to lean into this cross sell motion in the coming quarters. Now I’ll discuss our profitability and free cash flow, which demonstrates our commitment to a responsible growth philosophy.

Fiscal Q1 gross margins were 82.4%, consistent with our previously shared expectation for total gross margins to remain in the low 80 range. Operating expenses of $173,000,000 represented 61% of total revenue, consistent with the prior quarter and prior fiscal year. Q1 operating expenses included planned headcount growth, previously disclosed investments to support our strong ongoing growth trajectory and higher commission and bonuses on record sales results. Non GAAP EBIT grew 21% to $58,000,000 and non GAAP EBIT margin was 20.7%. In Q1, we achieved 47 on a rule of 40 basis, which reflects a healthy balance between revenue and profitability.

Turning to key balance sheet and cash flow indicators. We ended Q1 with no debt and a cash position of $363,000,000 Free cash flow was $30,000,000 primarily driven by continued strength in deferred revenue from SaaS contracts and solid software subscription renewals. During the quarter, we repurchased $15,000,000 of stock and our diluted share count remained flat at 45,000,000 shares. As Sanjay mentioned, we announced our intention to acquire Satori Cyber, a data and AI security company. We believe there are extensive opportunities to help customers responsibly utilize AI in their production environments, and Satori can help Commvault accelerate this vision.

The transaction will be funded from our international cash balance. We expect the transaction to close later this quarter and to be modestly dilutive to margins for the next several quarters. Now I’ll discuss our outlook for Q2 and our updated outlook for fiscal year twenty twenty six. For fiscal Q2 twenty twenty six, we expect subscription revenue, which includes both the software portion of term based licenses and SaaS to be in the range of $174,000,000 to $176,000,000 This represents 31% year over year growth at the midpoint. We expect total revenue to be in the range of $272,000,000 to $274,000,000 with growth of 17% at the midpoint.

At these revenue levels, we expect Q2 consolidated gross margins to be in the range of 81% to 82%. We expect Q2 non GAAP EBIT margins of approximately 20%, including the integration of Satori Cyber. Now I’m happy to share that we are raising our fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of 03/31/2025. For historical comparison, please refer to our Q1 earnings presentation.

We expect constant currency FY 2026 total ARR growth of 18% year over year. This will be driven by subscription ARR, which we expect to increase by 24% year over year. From a full year fiscal twenty twenty six revenue perspective, we expect subscription revenue to be in the range of $753,000,000 to $757,000,000 growing 28% at the midpoint with strong contributions from both term software licenses and SaaS. We expect total revenue of $1,161,000,000 to $1,165,000,000 an increase of 17% at the midpoint. Moving to our full year fiscal twenty twenty six margin, EBIT and cash flow outlook.

We continue to expect gross margins to be 81% to 82%. This range reflects continued growth in our SaaS platform, which carries a different gross margin profile than software. We now expect non GAAP EBIT margins of approximately 20.5%, including the dilutive impact of Satori. Non GAAP EBIT margins also reflect our ongoing investments in additional growth driving initiatives. We continue to expect full year free cash flow of $210,000,000 to $215,000,000 This guidance reflects our transition to a cash taxpayer, following the full utilization of our tax carryforward credits in fiscal twenty twenty five.

In closing, our Q1 results underscore the strong and accelerating demand for our cyber resilience platform. This momentum, combined with our focused investments, positions us well to capture a greater share of the market in FY 2026 and beyond. While we remain mindful of the broader macro environment, our updated guidance reflects our confidence in the opportunity ahead and our ability to execute against it. Now, I will turn it back to the operator to open the line for questions. Operator?

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

Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for taking the question and congrats on the results, continued solid execution. I guess two quick questions for me. I know, Jen, you had mentioned the operating margin in both this quarter as well as through the full fiscal year does reflect the dilution impact of Satori. I’m curious, from a revenue perspective, are you factoring in any kind of contributions from that acquisition?

And then as a second question, a lot of commentary around cross sell, upsell opportunity. I think last quarter, talked about roughly 30% of your SaaS customers purchasing more than one solution. I’m just curious, I know you mentioned 45% growth, but how do we think about that as we move forward? How successful have you been and where do you think that can ultimately get to? Thank you.

Jen Derico, CFO, Commvault: Yeah, thanks so much for the question, Erin. I’ll start with the first one around Satori. So we’re incredibly excited about the Satori acquisition. It absolutely adds technology and talent as we think about expanding our the breadth and depth of our platform. From an overall top line perspective, it is immaterial and not really does not factor into any sort of uplift in revenue guidance.

As it relates to the cross sell, we have made really good progress. It’s early innings. You heard me say last quarter, this is the first quarter we’re actually focused on it as a company. You heard me say in my prepared remarks that we saw an increase of 45% from a customer perspective using two or more. The other things I would add to you is the fact that you heard in my script that we’re seeing numerous customers purchase five or six offerings, So there’s progress there.

Another stat I’ll share with you is within the SaaS net dollar retention rate. Historically, and I’ve shared with you that that mix has been one third cross sell. This past quarter it was 40%. And so ultimately, I think we’re seeing really good traction. And then in addition to that, our security skews grew double digits quarter over quarter contributing into that cross sell and made up 20% of our net new ARR.

Sanjay Merchandani, CEO, Commvault: Thank you.

Conference Operator, Conference Operator: Our next question comes from the line of Jason Ader with William Blair. Your line is open.

Jason Ader, Analyst, William Blair: Yes, thank you. Can you

Sanjay Merchandani, CEO, Commvault: guys talk

Jason Ader, Analyst, William Blair: about the bundling strategy that you have right now? You have a lot of different products, obviously, seeing good success with cross sell. What is the sort of kind of high level bundling strategy? Is it still a work in progress? Are you feeling good about where you sit with bundles today?

Sanjay Merchandani, CEO, Commvault: Hey Jason, Sanjay. Good to hear from you. So there are some logical bundles that we offer customers today that just make sense together, like Cleanroom Directory or Office three sixty five and Active Directory. So we have those sort of packages that customers tend to avail of naturally because they work better together. As our cyber resilience platform continues to evolve, you’ll see more of these logical capabilities coming together with the value proposition.

And in November, as I said in my prepared comments, we have shipped, and you’ll hear a lot more about how we’re looking at our platform there. Hold that question for us for a little longer, and you’ll see a lot more there.

Aaron Rakers, Analyst, Wells Fargo: Thank you.

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

Howard Ma, Analyst, Guggenheim Securities: Great. Thanks and excellent quarter guys. I have one for Sanjay and then one for Jen. For Sanjay, when you think about supplementing future growth through M and A, what are some of the key categories by which your team evaluates opportunities? And then on the Tutori acquisition, are you seeing strong evidence that customers want to procure governance and policy enforcement for AI training from their data protection vendor as opposed to other infrastructure software providers?

Thanks.

Sanjay Merchandani, CEO, Commvault: Hey, Howard. It’s going to be hard for me to tell you what I’m going after, but I’ll tell you what I’ve gone after. So if you look at the sort of history of acquisitions we’ve made, they’ve been really, if you look at Trapex and what Trapex brought to us, if you look at Appranix, were core security and cloud native capabilities as the platform evolves. So as customers started moving more complicated workloads, building cloud native workloads in the cloud, in a multi cloud environment, we wanted to make sure that the way we protected those and gave resilience, one size doesn’t fit all. So they fleshed out our ability, for example, to keep customers more secure at the front, and then in turn protect them in the cloud native way.

Now, when we took on Clumio, Clumio gave us very good, large AI data protection capabilities. Now, Satori, you’re saying that we’re bringing those two things together. You’ve got the whole visibility, observability, and policy enforcement across semi structured and structured data that tacks on very well to the unstructured data pieces that our platform has. And also, as customers start training models and using AI internally, policy enforcement and observability on LLMs and other things, and the data that trains those models naturally fits that. So it’s not I’ll answer both your questions together.

So it’s not about separate policy enforcement on a separate tool set for just AI, and there will be a place for that. But this is really as your models get trained internally and your employees are using the technology, you have the same level of visibility as to what’s being fed, what’s being used, what’s being queried, so you get to enforce policy that way. And it’ll all be natural. It’ll all be part of the platform. So we’re going to integrate it very aggressively so that it’s just a natural way to work with the platform.

What we do already, we give you policies already. This is an attachment. That’s how I think about it.

Howard Ma, Analyst, Guggenheim Securities: Got it. That makes a lot of sense Sanjay. For Jen, when we look at the full year revenue guidance being raised by more than the Q1 upside, how much do the quality and the size of your renewal base this year versus last year play a factor, including, I guess potential for seat expansion and security cross sell?

Jen Derico, CFO, Commvault: Yeah, thanks for the question Howard. Actually, as we think about the overall revenue guidance, the overall renewal base has been already considered and ultimately what you’re seeing in the guide is the strength of the business both on the software and the staff side of things.

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

Conference Operator, 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: Great. Thanks for taking my questions. Very strong results all around. I want to dig in to maybe just the net new ARR in Q1. It does look like it skewed much more towards term license relative to SaaS just versus the trend over last year.

Very strong term license, net new ARR. Anything to call out there in terms of how deal dynamic shaped up or any color on maybe what was a bit weaker of a SaaS net new ARR quarter?

Jen Derico, CFO, Commvault: Yes, so first of all, I would say our SaaS business performed as expected and in line and we’re very pleased with that. The delta did come from over performance in the software side of things. At the very, very end of the quarter, we did benefit from higher close rates on a few software deals. As it relates to, as we think about the SaaS business overall and overall net new ARR on a quarterly basis, We believe going forward that you can see north of $20,000,000 in the SaaS net new ARR. And then on the go forward, $40,000,000 total net new ARR quarter over quarter for the remaining of the year.

Rudy Kessinger, Analyst, D.A. Davidson: Okay. I was going to ask about kind of the sequencing of net new ARR for the quarters. That kind of answers that. I guess maybe a follow-up on that comment you just made about some higher close rates towards the very end of the quarter. Could you just talk about the linearity of the quarter at large and how things trended month to month?

Jen Derico, CFO, Commvault: Yes, I think, first of all, when we started the quarter, we always expected that we’d be between 30,000,000 and $35,000,000 of net new ARR and at the very, very end, kind of improved, but I’ll say in like the last week or so of the quarter on a few large deals and that’s really what you saw from a linearity perspective.

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

Jen Derico, CFO, Commvault: Yes, of course. Thank you.

Conference Operator, Conference Operator: 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 congrats Sanjay and Jen as well. I’ll ask maybe on Fed, if I could Sanjay, just maybe some of the assumptions you’re embedding in the guide, both for Sanjay and Jen and feedback you’re hearing because I know it is a big quarter for you guys in Fed for 2Q.

Jen Derico, CFO, Commvault: Yeah, I’ll start and then of course Sanjay, feel free to chime in. From a federal perspective, we feel incredibly good about our Fed business. It performed in line with our expectations in Q1, and overall we expect to see similar seasonality for the first half of the year, because we do know that overall the Fed is stronger in the first half of the year. Ultimately, I think what we’re seeing is that our FedRAMP High certification continues to be a competitive advantage for us.

Sanjay Merchandani, CEO, Commvault: Summed it up. Were hard to hear, Eric. Your question was just around Fed, right?

Eric Heath, Analyst, KeyBanc Capital Markets: Right. And if I could ask a follow-up, Jen, just on the margins. I know you covered some of it, the reasons for OpEx in the quarter, but just anything you can share why we’re not seeing more drop to the bottom line? Maybe just help a little bit more on granularity on organic operating margins for the year? Thanks.

Jen Derico, CFO, Commvault: Sure. So let me just start by saying, I think we’re incredibly proud of the overall performance. The business performed in line with our expectations. We had a record quarter and that related to not only increased bonus and commissions, as well as our regular planned headcount additions associated with the investments we plan to make. Now I would just highlight the fact that we landed at 47 on a rule of 40.

So I think overall, we are balancing the business and profitability and growth quite well. As we think out for the rest of the year, like I said, the dilutive so Tory is the only dilutive impact. It’s about 50 bps, other than that the business is performing exactly how we expected to my original guidance from an overall EBIT perspective.

Sanjay Merchandani, CEO, Commvault: And just one more element of color on that is our SaaS business is growing, and it grew 63% year on year on year on an ARR basis, and we’re seeing more workloads, and that has a different margin profile, which in the overall scheme of things is reflected. So it’s goodness, so the growth is there, and particularly proud of the 47

Jen Derico, CFO, Commvault: And I would just close out with saying that from a guidance perspective, our original guidance showed a rule of 36 and a rule of 40, and my updated guidance shows a rule of 38. So there’s already performance and strong balance there.

Eric Heath, Analyst, KeyBanc Capital Markets: Great. Thanks so much.

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

Sanjay Merchandani, CEO, Commvault: Hey, guys. I wanted to go

Mike Melnyk, Head of Investor Relations, Commvault0: back to something, Jen, you said, you know, Microsoft three sixty five has been sort of a killer application, you know, the lion’s share of of Metallic. But what are you seeing there with either number of seats protected or however you wanna talk about it first? What are you seeing with some of those newer solutions like Cloud Rewind? You mentioned, some of them are certainly come substantial. So in other words, what I’m really asking is, is there a way to slice sort of the contribution of, I think you said Microsoft three sixty five and Airgap versus some of the other newer products?

Jen Derico, CFO, Commvault: Sure. So, from an M365 and AirGap protect, those are our oldest products and our most mature, and so they continue to carry the lion’s share of the ARR. However, our security offerings ThreatWise, ThreatScan, Cleanroom, Apranex, Risk Analysis, those grew double digits quarter over quarter and made up 20% of our net new ARR.

Sanjay Merchandani, CEO, Commvault: We’re happy with it.

Mike Melnyk, Head of Investor Relations, Commvault0: Yep, understood. Understood. And then Sanjay, conversation we always have is just shots on goal. Guess, how are you feeling about what you’re getting for shots on goal? I know there’s been a lot more marketing programs going on and Jen related to that.

We’re about 85% subscription now. So is there a way to think about how much is left for migrations within the base?

Sanjay Merchandani, CEO, Commvault: You want to go, Jen?

Jen Derico, CFO, Commvault: Sure. So, would first of start by saying, we’re really pleased with the overall performance of 85% of the business being on the recurring base of subscription. As we think about migrations, right, and overall, like our perpetual business continues to be a small amount of the overall revenue. We saw that come down this quarter. We’re focusing the business on subscription, right?

But ultimately, what we’re seeing is more and more of our ARR is coming from our land business, right? And so ultimately the growth is not really coming from the conversion, it’s much more about land, in particular on the SaaS side.

Sanjay Merchandani, CEO, Commvault: And from a conversion point of view, we’ve always held the line that we don’t want to do anything unnatural. Customers have choices, and we give them the choice. We lean in towards a subscription platform, be it SaaS or term license, but if for whatever reason customers wish to go perpetual, they have that choice right now.

Jen Derico, CFO, Commvault: And then, as it relates to your question on more shots on goal, right, we said this year was another year of investment to continue to maintain our momentum and growth. And you’re seeing that in the top line because it’s absolutely leading to more shots on goal and our execution continues to remain incredibly high.

Conference Operator, Conference Operator: Our next question comes from the line of Tom Blakey with Cantor. Your line is open.

Mike Melnyk, Head of Investor Relations, Commvault1: Hey, guys. Thank you for taking my questions and congratulations on a stellar fiscal 1Q here. Maybe for starters, two questions. Sanjay,

Sanjay Merchandani, CEO, Commvault: could

Mike Melnyk, Head of Investor Relations, Commvault1: you just maybe give us an update on the potential competitive displacements and maybe consolidating workloads on Commvault? This growth is pretty dynamic, and we’ve been talking about that for a while. I’d love to get a kind of update there in terms of the sustainability of this dynamic growth. And then, Jen, thank you for that color on the north of $20,000,000 net new ARR from SaaS. Can just maybe talk about any maybe changes there in terms of competition or maybe pricing of whatnot?

We talked about bundling, I think, in a prior question. Or is it just kind of net new conservatism because that doesn’t imply a lot of growth on a year on year basis from net new ARR that occurred in the last kind of four or five quarters? That’d be helpful. Thank you.

Sanjay Merchandani, CEO, Commvault: Yeah, Tom, from a displacement point of view, if you look at just the software on premise type of capability, that’s a market that’s growing low single digits. So we’re growing in a healthy pattern, which means we are taking share. We’re taking share because of a few things. One, our technology continues to lead. I mean, if you look at all the new Gartner reports, our technology continues to lead in every way.

Our delivery model with the partner ecosystem has evolved and continues to evolve every quarter. In my prepared comments, shared the new partnerships and the impact they’re going to have. The third piece is that the problem we solve, the hard problem we solve for customers goes beyond data protection. We’re not looking at entire environments on cloud native, we’re looking at true multi cloud, we’re looking at SaaS environments. And we make protection for customers, be it a SaaS workload, a cloud native workload, on premise workload completely transparent.

So when you take those factors and the customers are definitely consolidating, more in this case is not better. Having more vendors, more policies, more feet on the street to make things work is actually harder. And so, there definite is direction of consolidation to our advantage because our platform uniquely provides that capability at scale and does it in a hybrid environment.

Jen Derico, CFO, Commvault: And Tom, your overall SaaS, ultimately what you’re seeing is just strength in our overall organic business. Yes, Sanjay just hit on the competition element, we’re not really seeing too many changes there. Ultimately, customers want our full platform and our SaaS platform absolutely meets the moment. So ultimately, it’s just growth in the organic business.

Mike Melnyk, Head of Investor Relations, Commvault1: Okay, thank you.

Conference Operator, Conference Operator: And our last question comes from the line of Ittai Kidron with Oppenheimer. Your line is open.

Mike Melnyk, Head of Investor Relations, Commvault2: Thanks. Hey, guys. And again, congrats on a great quarter. I had, I guess, a couple for me. First of all, Jin, there’s some of the things we hear from the channel that there are customers who are pulling forward calendar 2026 budget plans into actually into 2025.

So I’m kind of wondering as you look at your strong performance, clearly the market is doing very well, but is there a way for you to tell if there’s a pull forward activity within your customers right here, right now?

Jen Derico, CFO, Commvault: Yes, thanks for the question. We spent a lot of time with our go to market team here and we’re not seeing any pull forward. It’s just strength in the overall market and our product meeting the needs of customers and our team executing incredibly well.

Mike Melnyk, Head of Investor Relations, Commvault2: Excellent. Then maybe as a follow-up, you started a new year, can you talk about the comp plans? How have they changed, if anything? What are you incentivizing more or less of this year?

Jen Derico, CFO, Commvault: Sure. So we don’t talk we don’t give a lot of details around the comp plans, but what I can tell you is our team is incentivized to absolutely go after overall recurring revenue and we are balancing the need between meeting the needs of what customers want. Ultimately, it’s all in line. It’s a paper performance.

Mike Melnyk, Head of Investor Relations, Commvault2: Very good, I appreciate it. Congrats.

Jen Derico, CFO, Commvault: Thank you.

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

Mike Melnyk, Head of Investor Relations, Commvault3: Thank you everyone for joining this morning. If you have any additional questions, please feel free to follow-up with me by email. And also, as Sanjay mentioned, we encourage everyone to register for the SHYFT user event in New York City, November 1112. Visit our website for details. Thanks very much.

Conference Operator, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining, and you may now disconnect.

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