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Commvault: Fiscal 1Q17 Financial Results

Y/Y revenue and net loss increasing

(in $ million) 1Q16 1Q17 Growth
Revenue
139.1 152.4 10%
Net income (loss) (1.3) (2.0)  

Commvault Systems, Inc. announced its financial results for the first quarter ended June 30, 2016.

N. Robert Hammer, chairman, president and CEO stated: “We began fiscal year 2017 with a solid first quarter, highlighted by year-over-year software revenue growth of 13% and significant year-over-year improvement in operating performance. We are also pleased that Gartner has positioned Commvault as a Leader in the Magic Quadrant for Data Center Backup and Recovery for a sixth consecutive year. We believe placement in the new Magic Quadrant validates our strategy to help companies manage and protect their data, and to flexibly adopt new technologies, in particular the cloud. The move to the cloud continues to be a major factor contributing to our continued business momentum as our software solutions help customers solve critical challenges as they migrate to the cloud or deploy big storage infrastructures. We expect that these factors, combined with continued successful market adoption of software solutions based on the new Commvault Data Platform and associated services, will drive our fiscal 2017 revenue growth objectives.”

Total revenues for the first quarter of fiscal 2017 were $152.4 million, an increase of 10% year-over-year, and 11% on a year-over-year constant currency basis. Software revenue was $63.9 million, an increase of 13% year-over-year, and up 15% on a year-over-year constant currency basis. Services revenue in the quarter was $88.5 million, an increase of 7% year-over-year, and 8% on a year-over-year constant currency basis.

On a GAAP basis, loss from operations (EBIT) was $2.5 million for the first quarter compared to a loss of $6.3 million in the prior year. Non-GAAP EBIT increased 62% to $15.0 million in the quarter compared to $9.3 million in the prior year.

For the first quarter of fiscal 2017, Commvault reported a GAAP net loss of $2.0 million, or a $0.05 loss per diluted share. Non-GAAP net income for the quarter was $9.5 million, or $0.21 per diluted share, versus $0.12 per diluted share in the first quarter of fiscal 2016.

Operating cash flow totaled $24.0 million for the first quarter of fiscal 2017. Total cash and short-term investments were $410.2 million as of June 30, 2016 compared to $387.2 million as of March 31, 2016. During the quarter, there were no borrowings against the revolving credit facility or repurchases of Commvault’s shares. As of July 26, 2016, there is $93.1 million available under the share repurchase program that currently expires on March 31, 2017.

Recent Business Highlights:

  • On June 14, 2016, announced it was positioned by Gartner, Inc. in the Leaders quadrant of the recently released Magic Quadrant for Data Center Backup and Recovery Software. Gartner positioned Commvault highest on execution and furthest on completeness of vision, marking Commvault’s sixth consecutive year as a leader in Gartner’s market evaluation for backup and recovery.
  • On June 22, 2016, introduced an early adopter program for two new Endpoint Data Protection and Email Archive Software as Service (SaaS) offerings to address the on-going market shift for Cloud-based solutions. Customers participating in the early adopter program can use the fully-managed cloud service to automatically and securely backup data on employee laptops and desktops and archive email, reducing the risk of data loss from breaches and lost or stolen endpoint devices. In addition to protecting against data loss, the SaaS offerings enable enterprise-wide compliance and eDiscovery of data on endpoints and in email.
  • On June 2, 2016, announced that MEDITECH, a provider of electronic health records (EHRs), certified Commvault’s data protection and recovery solution for its EHR system with Hewlett Packard Enterprise 3PAR Storage Arrays. With this certification, healthcare providers will have access to a fully integrated and modernized data management solution that can backup, archive and recover MEDITECH applications, as well as clinical, business and other applications and data, both on premise and in the cloud via MEDITECH’s network of solution integrators and hosting service providers.
  • On April 19, 2016, announced support for Amazon Web Services (AWS) Snoball, a secure petabyte-scale transport solution to help companies migrate large amounts of data into and out of the AWS Cloud. Commvault’s strategic relationship with AWS helps customers move to the cloud faster, more efficiently, and more securely than a traditional Internet connection. The announcement underscores Commvault’s leadership in providing customers with new options to leverage the cloud for DR, development/test, and other workloads while keeping their data protected and accessible at all times.

Comments

(in $ million) 1Q16 1Q17 Y/Y growth % of total revenue
in 1Q17
Software revenue
56.5 63.9 13% 42%
Service revenue
82.6 88.5  7% 58%
Total 139.1 152.4 10% 100%

Just a proof of the end of the Commvault's success story: 2016 total compensation of chairman CEO Bob Hammer was reduced by 36% from 2015, at $3,239,908.

The past two years have been difficult and the company counts on its new Commvault Data Platform to rebound.

But more recent quarterly sales were about the same as in the same quarter two years ago (see below). At $152.4 million, they represent an increase of 10% over the prior-year period and a decline of 4% sequentially. But the company is back to loss after three quarters of profitability.

During the quarter, 68% of software license revenue was sold on a per terabyte capacity basis, down from 70% in Q4 2016.

Revenue from enterprise deals - over $100,000 in software revenue in a given quarter - represented 52% of total software revenue, resulting in a 19% Y/Y increase. The number of enterprise deals increased 23% Y/Y while average enterprise deal size decreased 4% to $242,000 during the most recent three-month period.

For the quarter, revenue transacted through main distributor Arrow was 34% of total sales.

From a geographic perspective, Americas, EMEA and APAC represented 55%, 30% and 15% of software revenue, respectively, for the quarter. On a year-over-year growth basis, they increased 12%, 11% and 22%, respectively.

Hammer is optimistic for next quarter: "We had a strong start to Q2 in new bookings. (...) On a sequential basis, we expect 2FQ17 total revenues to increase slightly." But he didn't reveal any figure. The company forecasts a sequential decrease in services revenue for both 2FQ17 and 3FQ17 "primarily from the compounding impact of the maintenance realignment process."

"We anticipate that we will have nominal net interest income in FY17," said the software company. " (...) we now believe full-year services revenue will be up slightly from FY16, which is an increase over previous estimates. Maintenance and support services revenue typically represents approximately 85% to 95% of our services revenue line."

In conclusion, Commvault still has a lot of work to do to achieve high sustainable long-term growth being in competition notably with companies like EMC, Veritas and newcomer Veeam..

Commvault added 450 new customers in the quarter, the historical customer count being 23,000 customers. In a most recent press release, Commvault published a partial list of new and existing customers that have expanded their investment into Commvault's portfolio of data management solutions and/or services in 1FQ17:

  • National Institute of Health - National Library of Medicine
  • Bureau of Consumer Financial Protection
  • Small Business Administration
  • US Railroad Retirement Board
  • Department of Justice and Equality
  • Eisenhower Medical Center
  • UW Health
  • Brandeis University
  • University of Memphis
  • Camberwell Grammar School
  • McCain Foods Limited
  • Smals
  • Ontex Group N.V.
  • Fleetmatics Ireland
  • T-Systems Hungary Ltd.
  • Lieb Bau Weiz GmbH
  • BRZ Bundesrechenzentrum GmbH
  • UCS Solutions
  • CSL Limited
  • Renfe
  • Vishay Intertechnology Inc.
  • Shandong Inspur Cloud Service Information Technology Co. Ltd.

 

Fiscal period Revenue Y/Y growth Net income (loss)
FY14 586.3 18% 64.1
1Q15 152.6 14% 12.7
2Q15 151.1 7% 6.5
3Q15 153.0 -0% 3.1
4Q15 150.7 -4% 3.4
FY15 607.5 4% 25.7
1Q16 139.1 -9% (1.3)
2Q16 140.7 -7% (9.2)
3Q16 155.7 2% 4.9
4Q16 159.6 6% 58
FY16 595.1 -2% 0.1
1Q17 152.4 10% (2.0)

 
To read the earnings call transcript

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