CommVault: Fiscal 2Q14 Financial Results

(in US$ million)	2Q13	2Q14	6 mo. 13	6 mo. 14
Revenues	118.2	141.9	229.4	276.3
*Growth*		20%		*20%*
Net income (loss)	13.9	17.4	24.0	30.8

CommVault Systems, Inc. announced its financial results for the second quarter ended September 30, 2013.

N. Robert Hammer, CommVault’s chairman, president and CEO stated: “Our fiscal second quarter results continued our trend of delivering consistent, double-digit revenue and non-GAAP operating income growth. Quarterly results were highlighted by a year-over-year revenue increase of 20% and a non-GAAP operating income increase of 31%. Our pace of innovation and high level of customer satisfaction continue to be important contributors to our success. Given the opportunity ahead of us, we will continue to heavily invest for growth and innovation, particularly in our sales and technical teams.”

Total revenues for the second quarter of fiscal 2014 were $141.9 million, an increase of 20% over the second quarter of fiscal 2013 and an increase of 6% sequentially.

Software revenue in the second quarter of fiscal 2014 was $70.8 million, an increase of 20% year-over-year and 8% over the first quarter. Services revenue in the second quarter of fiscal 2014 was $71.0 million, an increase of 21% year-over-year and 3% sequentially.

On a GAAP basis, income from operations (EBIT) was $26.4 million for the second quarter, an 18% increase from the $22.4 million in the same period of the prior year. Non-GAAP income from operations (EBIT) increased 31% to $37.8 million in the second quarter of fiscal 2014 compared to $28.8 million in the second quarter of the prior year. On a sequential basis, non-GAAP income from operations (EBIT) increased 20% in the second quarter of fiscal 2014.

For the second quarter of fiscal 2014, CommVault reported net income of $17.4 million, an increase of $3.5 million compared to the same period of the prior year. Non-GAAP net income for the quarter increased 31% to $23.9 million, or $0.48 per diluted share, from $18.3 million, or $0.38 per diluted share, in the same period of the prior year.

Operating cash flow totaled $24.5 million for the second quarter of fiscal 2014 which was an increase of less than $0.1 million compared to the second quarter of fiscal 2013. Total cash and short-term investments were $485.1 million as of September 30, 2013 compared to $435.9 million as of March 31, 2013. There were no share repurchases during the second quarter of fiscal 2014.

On October 24, 2013, the company’s board of directors authorized a $47.2 million increase to the company’s existing stock repurchase program and extended the expiration of the stock repurchase program to March 31, 2015. As of October 29, 2013, the company has repurchased $117.2 million of common stock (5.74 million shares). With the additional $47.2 million authorized by the board of directors, there is $150.0 million remaining in the repurchase program.

Recent Business Highlight:

On September 3, 2013, it announced the results of its fiscal 2013 support services survey in which CommVault achieved a 96% customer satisfaction rating demonstrating its excellence in technical services and support. In contrast, customers who received similar support services from similarly sized vendors reported an average customer satisfaction rating of 89%.
On August 20, 2013, it announced the industry’s first VM intelligent archiving capability to help enterprises and service providers eliminate VM sprawl and regain control of virtual infrastructure resources. VM sprawl results from pervasive deployment and growth of VMs, some of which then sit unutilized long after their useful lives.

Comments

Abstracts the earnings call transcript: Bob Hammer, president, chairman and CEO: "Software revenue was $70.8 million and grew 20% year-over-year and 8% sequentially. Services revenue was $71 million, and grew 21% year-over-year and 3% sequentially. "We generated approximately $24.5 million of cash flow from operations during Q2, exiting the quarter with approximately $485.1 million of cash and short-term investments and no debt. "Recent quarterly results of leading tech companies in our industry indicate there was some slow down and saturated IT spending and push-outs of larger deals. On a more positive note, for the first time in many years, we are experiencing improvements in all the major regions of the global economy. The situation in U.S. is improving at a slow pace, Europe has finally come out of recession and there is positive momentum in AsiaPac. We are assuming storage-related IT spend will gradually improve, but still remain lackluster through the end of our fiscal year 2014. "We continue to believe, we will be able to achieve solid double-digit revenue and EBIT growth in fiscal 2014. "We are particularly cautious about U.S. federal government spending due to uncertainty associated with recent fiscal impasse. "Now, let me spend a minute updating our Simpana 10, which is the technical foundation of the strategy. This is a key milestone in the Simpana 10 control launch base with over 1,000 Simpana 10 customers deploying the new platform. "We will launch these as part of our Simpana 10 platform and they include leading edge next-generation products for SharePoint and exchange archiving. Two, lower end data protection products, which will be sold through high velocity SMB reseller channels; self-service try and buy products for the SMB market, including products targeted to the virtual machine administrator and products aimed at replicated task recovery; and lastly, increased partner option of IntelliSnap, which is data aware management of snapshots." Brian Carolan, CFO: "Capacity-based license sales represented 80% of our Q2 software revenue, which was up from 74% in Q1 FY '14 and 64% in the prior year period. "For the quarter, software revenues derived from indirect distribution channels increased 26% over the prior year period and represented 93% of software revenue. "For the quarter, software revenues derived from indirect distribution channels increased 26% over the prior year period and represented 93% of software revenue. "For the quarter, revenue from U.S. operations generated 59% of total revenues resulting in a 12% year-over-year increase. While revenue from international operations generated the balance resulting in a 35% year-over-year increase. The growth in revenue in our international locations is primarily due to increases in Europe, Canada and Asia-Pacific as we expand our international operations. "For the quarter, revenue transacted through Arrow was approximately 32% of total revenue, growing 33% year-over-year and 15% sequentially. "Sales through our Dell relationships accounted for approximately 19% of total revenues for the quarter. Total quarterly Dell revenues grew 11% year-over-year and was flat sequentially. "We expect to see Dell revenue to further decline in our fiscal Q3. "We added approximately 400 new customers in the quarter. Our historical customer count now totals approximately 19,000 customers."