Commvault: Fiscal 3Q20 Financial Results

(in $ million)	3Q19	3Q20	9 mo. 19	9 mo. 20
Revenue	184.3	176.4	229.1	208.9
*Growth*		-4%		*-9%*
Net income (loss)	13.4	(0.7)	(5.7)	(14.6)

Commvault Systems, Inc. announced its financial results for the third quarter ended December 31, 2019.

“I am pleased to report that we again delivered results above expectations and that we did it while refreshing our data management portfolio, launching our new SaaS offering, Metallic, and integrating Hedvig, our first major acquisition,” said Sanjay Mirchandani, president and CEO. “Our ability to achieve these results is a direct reflection of the progress we are making on the simplification, innovation and execution priorities we established at the start of the fiscal year. These priorities will be the foundation for our return to growth.“

Total revenues for 3FQ20 were $176.4 million, a decrease of 4% Y/Y and an increase of 5% sequentially. Total repeatable revenue was $123.4 million, an increase of 2% Y/Y and 1% sequentially. Subscription and utility annual contract value (ACV) grew 56% Y/Y to approximately $140.0 million.

Software and products revenue was $76.6 million, a decrease of 9% Y/Y, and an increase of 12% sequentially.

Services revenue in the quarter was $99.7 million, flat Y/Y and an increase of 1% sequentially.

On a GAAP basis, loss from operations was $0.5 million for the third quarter compared to income of $10.4 million in the prior year. The third quarter GAAP results in FY20 included $4.4 million of transactions expenses associated with the acquisition of Hedvig, Inc., $2.8 million of amortization related to the intangible assets recognized in the acquisition of Hedvig and a portion of the additional compensation expenses related to the retained employees of Hedvig. These expenses have been excluded from our non-GAAP results. Non-GAAP EBIT was $28.9 million in the quarter compared to $33.1 million in the prior year.

For the 3FQ20, the company reported GAAP net loss of $0.7 million, or $0.01 per diluted share. Non-GAAP net income for the quarter was $21.7 million, or $0.47 per diluted share.

Operating cash flow totaled $0.9 million for 3FQ20 compared to $31.1 million in the prior year quarter. Operating cash flow in 3FQ20 included approximately $5.0 million of payments related to Hedvig transaction costs and approximately $8.0 million of severance payments related to recent restructuring actions.

Total cash, restricted cash, and short-term investments were $345.0 million as of December 31, 2019 compared to $458.3 million as of March 31, 2019.

Comments

The company continues to suffer since several years in the software backup industry where it was a leader.

For its most recent quarter, revenue was $176.4 million, a decrease of 4% Y/Y and an increase of 5% sequentially. It's the fourth quarter of decreasing sales and losses, this ones recently because of costs of Hedvig's acquisition.

Consequently, there few chances for the company to surpass its $711.1 million sales for current FY20.

Primary repeatable revenue streams are subscription software and maintenance services. The firm considers approximately 70% of its 3FQ20 total revenue to be repeatable in nature. These repeatable revenue streams, which were up approximately 2% Y/Y, continued to outperform non-repeatable revenue and help provide the firm with more visibility and predictability as they grow as a percentage of the base.

Revenue is poor in APAC (19%), and, for EMEA (31%), it's around twice less than in Americas (59%). Americas, increased 12% sequentially with growth being driven by 26% sequential increase in the number of enterprise revenue transactions. EMEA was up 36% sequentially and was also driven by higher volume of enterprise revenue transactions. The number of these transactions nearly doubled from 2FQ20. APJ decreased 36% sequentially coming off a strong quarter for that region in 2FQ20.

Total services revenue was approximately $99.7 million remaining flat Y/Y and a slight increase sequentially.

The company continues to see strong maintenance renewal rates as measured on a weighted average dollar basis. These renewal rates average approximately 90% for entire customer base and over 95% for larger customers. Over the past 5 years, 97% of Top 100 customers and 90% of Top 500 customers remain active with Commvault today.

ACV metric demonstrates the growth of firm's subscription and utility-based pricing models. As of 3FQ20, ACV has grown to $140 million, up 56% Y/Yand up 16% Q/Q. Growth in subscription and utility customer base drove a 4% sequential increase in these revenues, which represented 42% of software and products revenue, up from 37% in 4FQ19.

As of December 31, 2019, deferred revenue balance was approximately $333 million, an increase of 2% Y/Y and 4% Q/Q.

Momentum continues to build for Commvault Hyperscale solutions, delivering more than 10% Y/Y growth in 3FQ20. And 6 of Top 10 customers are now running Hyperscale.

The firm is selling across all market segments, including 7 figure deals to large enterprise customers and SME segments that deals under $500,000 were up approximately 30% sequentially.

Revenue from enterprise software deals, defined as deals over $100,000, represented 66% of software and products revenue for the quarter, an increase from 64% in 2FQ20. Revenue from these transactions was up 15% sequentially. Average enterprise deal size was approximately $279,000 during the most recent quarter.

Revenue and net income (loss) for Commvault in $million

Fiscal period

Revenue

Y/Y growth

Net income (loss)

FY15

607.5

25.7

FY16

595.1

-2%

0.1

FY17

650.5

0.5

1Q18

166.0

(0.3)

2Q18

168.1

(1.0)

3Q18

180.4

(59.0)

4Q18

184.9

11%

(1.7)

FY18

699.4

(61.9)

1Q19

176.2

(8.6)

2Q19

169.1

0.9

3Q19

184.3

13.4

4Q19

181.4

-2%

(2.2)

FY19

711.1

3.6

1Q20

162.2

-8%

(6.8)

2Q20

167.6

-1%

(7.1)

3Q20

176.4

-4%

(0.7)