Commvault Announces Fiscal 2019 Third Quarter Financial Results

Tinton Falls, N.J., Jan. 29, 2019 – Commvault today announced its financial results for the third quarter ended December 31, 2018.

— Significant Y-o-Y earnings growth —

— Repeatable revenues up 15% Y-o-Y —

— Subscription and Utility Annual Contract Value (ACV) grew more than 2X over prior year to $90 million —

Third Quarter Highlights Include:

Third Quarter
GAAP Results:
Revenues $184.3 million
Incomes from Operations (EBIT) $10.4 million
EBIT Margin 5.7%
Diluted Income Per Share $0.28
Non-GAAP Results:
Income from Operations (EBIT) $33.1 million
EBIT Margin 18.0%
Diluted Earnings Per Share $0.54

(Download Financial Tables)

Tinton Falls, N.J. – Jan. 29, 2019 – Commvault [NASDAQ: CVLT] today announced its financial results for the third quarter ended December 31, 2018.

N. Robert Hammer, Commvault’s Chairman, President and CEO stated, “With the foundation of Commvault Advance in place, and what we see as a trend of enterprise customers seeking to consolidate their data management solutions, we were able to deliver strong sequential software and products revenue growth of 22%. Our revenue performance, coupled with our continued successful efforts to right-size the business, allowed us to continue to deliver significant year-over-year earnings growth, as evidenced by the 51% year to date growth in non-GAAP operating income. We believe Commvault is well positioned for both our fiscal Q4 and fiscal 2020. During the quarter we also repurchased approximately $54 million of our common stock.”

Total revenues for the third quarter of fiscal 2019 were $184.3 million, an increase of 2% year-over-year, and 9% sequentially. Total repeatable revenue (see Table IV) was $121.0 million, an increase of 15% year-over-year.

Software and products revenue was $84.5 million, an increase of 4% year-over-year, and 22% sequentially. Subscription and utility annual contract value (ACV) more than doubled year-over-year to approximately $90 million. See Table IV for an explanation of ACV.

Services revenue in the quarter was $99.8 million, an increase of 1% year-over-year and flat sequentially.

On a GAAP basis, income from operations (EBIT) was $10.4 million for the third quarter compared to $3.5 million in the prior year. These third quarter GAAP results in fiscal 2019 included $6.3 million of expenses related to a non-routine shareholder matter and restructuring. These expenses have been excluded from our non-GAAP results and are further discussed in Table IV. Non-GAAP EBIT was $33.1 million in the quarter compared to $22.0 million in the prior year, an increase of 50%.

For the third quarter of fiscal 2019, Commvault reported GAAP net income of $13.4 million, or $0.28 per diluted share. Non-GAAP net income for the quarter was $25.4 million, or $0.54 per diluted share.

Operating cash flow totaled $31.1 million for the third quarter of fiscal 2019 compared to $31.2 million in the prior year quarter. Total cash and short-term investments were $457.9 million as of December 31, 2018 compared to $462.4 million as of March 31, 2018.

During the third quarter of fiscal 2019, Commvault repurchased approximately 937,000 shares of its common stock totaling $54.4 million.

A reconciliation of GAAP to non-GAAP results has been provided in Financial Statement Table IV included in this press release. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

Recent Business Highlights:

On October 9-11, 2018, Commvault held its third annual customer conference, Commvault GO, in Nashville, Tenn. The conference featured more than 150 breakout sessions, comprised of labs, mini-theaters, and industry-specific and customer speaking sessions. More than 2,000 customers, prospects, industry analysts, media and business partners attended the event to learn how Commvault and its partner ecosystem can help their organizations simplify, streamline and scale backup and recovery processes across diverse environments; enhance their use of multiple clouds for storage, application deployment and disaster recovery; recover quickly from ransomware or malware attacks; and identify and preserve data to meet GDPR and other regulations. Other highlights included:

  • New this year, Commvault GO was front-ended by a partner summit, Commvault Partner Xchange. More than 300 attendees and representatives from 117 partner organizations came together to discuss the value that Commvault solutions can bring to their businesses.
  • Commvault focused on environmental efficiencies, reducing the amount of waste normally generated by an event of this size. This included donating 42,000 square feet of exhibit carpet for reuse and recycling, rather than sending it to a landfill; donating signage materials to a local high school; minimizing disposable food and beverage containers; replacing single-use plastic water bottles with dispensers; locally sourcing food items; and replanting live trees used to decorate the exhibit hall.
  • Commvault issued seven announcements at the conference, including announcements regarding new as-a-service options for Commvault Complete Backup and Recovery, an innovative user interface called the Commvault Command Center, an expanded portfolio of appliances and expanded relationships with NetApp and Hewlett-Packard Enterprise.
  • Commvault Chairman, President and Chief Executive Officer N. Robert Hammer and Chief Operating Officer Al Bunte delivered a main stage presentation to show how Commvault’s recently simplified product portfolio is already enabling enterprises to modernize, simplify and streamline their data management.
  • Commvault held its third annual Women in Technology reception, underscoring Commvault’s commitment to developing women in technology and leadership. Commvault also presented the Tennessee chapter of Women in Technology with a $2,500 scholarship earmarked for supporting local STEM educational initiatives for women and girls.

Use of Non-GAAP Financial Measures

Commvault has provided in this press release the following non-GAAP financial measures: non-GAAP income from operations, non-GAAP income from operations margin, non-GAAP net income, and non-GAAP diluted earnings per share. This selected financial information has not been prepared in accordance with GAAP. Commvault uses these non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. In addition, Commvault believes that these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP financial measures, in evaluating Commvault’s ongoing operational performance. Commvault believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Commvault’s industry, many of which present similar non-GAAP financial measures to the investment community. Commvault has also provided software and products, services and total revenues on a constant currency basis. Commvault analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations. Finally, Commvault has provided free cash flow, which Commvault uses to measure the amount of cash flow the business is generating after capital expenditures.

All of these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided in Table IV included in this press release. (Download Financial Tables)

Non-GAAP income from operations and non-GAAP income from operations margin. These non-GAAP financial measures exclude noncash stock-based compensation charges and additional FICA and related payroll tax expense incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. In fiscal 2019, Commvault also excluded restructuring, costs related to a non-routine shareholder matter and costs associated with a non-routine legal settlement from its non-GAAP results. These expenses are further discussed in Table IV. Commvault believes that these non-GAAP financial measures are useful metrics for management and investors because they compare Commvault’s core operating results over multiple periods. When evaluating the performance of Commvault’s operating results and developing short- and long-term plans, Commvault does not consider such expenses. Although noncash stock-based compensation and the additional FICA and related payroll tax expenses are necessary to attract and retain employees, Commvault places its primary emphasis on stockholder dilution as compared to the accounting charges related to such equity compensation plans. In addition, because of the varying available valuation methodologies, subjective assumptions such as volatility (which are outside of Commvault’s control), and the variety of awards that companies can issue, Commvault believes that providing non-GAAP financial measures that exclude noncash stock-based compensation expense and the additional FICA and related payroll tax expenses incurred on stock option exercises and vesting of restricted stock awards allow investors to make meaningful comparisons between Commvault’s operating results and those of other companies.

There are a number of limitations related to the use of non-GAAP income from operations and non-GAAP income from operations margin. The most significant limitation is that these non-GAAP financial measures exclude certain operating costs, primarily related to noncash stock-based compensation, which is of a recurring nature. Noncash stock-based compensation has been, and will continue to be for the foreseeable future, a significant recurring expense in Commvault’s operating results. In addition, noncash stock-based compensation is an important part of Commvault’s employees’ compensation and can have a significant impact on their performance. Lastly, the components that Commvault excludes in its non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP financial measures.

Commvault’s management generally compensates for the limitations described above related to the use of non-GAAP financial measures by providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Further, Commvault management uses non-GAAP financial measures only in addition to, and in conjunction with, results presented in accordance with GAAP.

Non-GAAP net income and non-GAAP diluted earnings per share (EPS). Non-GAAP net income excludes noncash stock-based compensation, and the additional FICA and related payroll tax expenses incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. In fiscal 2019 Commvault also excluded restructuring, costs related to a non-routine shareholder matter and costs associated with a non-routine legal settlement from its non-GAAP results. These expenses are further discussed in Table IV. In addition, non-GAAP net income and non-GAAP diluted EPS incorporate a non-GAAP effective tax rate of 27% in fiscal 2019 and 37% in fiscal 2018.

Commvault anticipates that in any given period its non-GAAP tax rate may be either higher or lower than the GAAP tax rate as evidenced by historical fluctuations. The GAAP tax rates in recent fiscal years were not meaningful percentages due to the dollar amount of GAAP pre-tax income. For the same reason as the GAAP tax rates, the estimated cash tax rates in recent fiscal years are not meaningful percentages. Estimated cash taxes for fiscal 2018 were approximately $6 million. Estimated cash taxes for fiscal 2019 are expected to be less than $10 million and relate primarily to Commvault’s international operations. Commvault defines its cash tax rate as the total amount of cash income taxes payable for the fiscal year divided by consolidated GAAP pre-tax income. Over time, Commvault believes its GAAP and cash tax rates will align. Commvault measured itself to non-GAAP tax rates of 37% in fiscal 2018 and will measure itself to a non-GAAP tax rate of 27% in fiscal 2019. The reduction in the rate is the result of U.S. corporate tax reform.

Commvault considers non-GAAP net income and non-GAAP diluted EPS useful metrics for Commvault management and its investors for the same basic reasons that Commvault uses non-GAAP income from operations and non-GAAP income from operations margin. In addition, the same limitations as well as management actions to compensate for such limitations described above also apply to Commvault’s use of non-GAAP net income and non-GAAP EPS.

Conference Call Information

Commvault will host a conference call today, Jan. 29, 2019, at 8:30 a.m. EST (5:30 a.m. PST) to discuss its financial results. To access this call, dial 844-742-4247 (domestic) or 661-378-9470 (international). The live webcast can be accessed under the “Events” section of Commvault’s website. An archived webcast of this conference call will also be available following the call.

About Commvault

Commvault is a recognized global leader in enterprise backup, recovery, and data management across any hybrid environment. Commvault’s converged data management solution redefines what backup means for the progressive enterprise through solutions that protect, manage and use their most critical asset — their data. Commvault software, solutions and services are available from the company and through a global ecosystem of trusted partners. Commvault employs more than 2,500 highly-skilled individuals across markets worldwide, is publicly traded on NASDAQ (CVLT), and is headquartered in Tinton Falls, New Jersey in the United States. To learn more about Commvault visit www.commvault.com

Safe Harbor Statement

This press release may contain forward-looking statements, including statements regarding financial projections, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of software products and related services, general economic conditions, outcome of litigation and others. For a discussion of these and other risks and uncertainties affecting Commvault’s business, see “Item IA. Risk Factors” in our annual report in Form 10-K and “Item 1A. Risk Factors” in our most recent quarter report in Form 10-Q. Statements regarding Commvault’s beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from anticipated results. Commvault does not undertake to update its forward-looking statements. The development and timing of any product release as well as any of its features or functionality remain at our sole discretion.

1999-2019 Commvault Systems, Inc. All rights reserved. Commvault, Commvault and logo, the “C hexagon” logo, Commvault Systems, Solving Forward, SIM, Singular Information Management, Simpana, Commvault OnePass, Commvault Galaxy, Commvault Edge, Unified Data Management, QiNetix, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, Recovery Director, CommServe, CommCell, IntelliSnap, ROMS, APSS, CommvaultGO, CommValue, Commvault HyperScale, ScaleProtect, Commvault Activate, Commvault Orchestrate, Commvault Complete are trademarks or registered trademarks of Commvault Systems, Inc. All other third party brands, products, service names, trademarks, or registered service marks are the property of and used to identify the products or services of their respective owners. All specifications are subject to change without notice.

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