• Total Revenue: Increased 13% to $225 million.
• Total ARR: Rose 17% to $803 million.
• Subscription ARR: Accelerated 27% to $636 million.
• SaaS ARR: Jumped 66% to $188 million.
• Gross Margin: 83%, roughly flat year-over-year.
• Operating Expenses: Increased 15% to $137 million.
• Non-GAAP EBIT: $48 million with margins at 21.5%.
• Free Cash Flow: Grew 16% year-over-year to $44 million.
• Cash and Cash Equivalents: $288 million with no debt.
• Share Repurchase: $51 million of stock repurchased, representing 117% of free cash flow.
• Q2 Revenue Guidance: Expected to be $218 million to $222 million.
• Fiscal Year '25 Revenue Guidance: Expected to be in the range of $915 million to $925 million.
• Fiscal Year '25 Free Cash Flow Guidance: At least $200 million.

• Warning! GuruFocus has detected 6 Warning Sign with CVLT.

Release Date: July 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CommVault Systems Inc (NASDAQ:CVLT) reported a 13% increase in total revenue to $225 million for Q1 FY 2025.
• Total ARR rose 17% to $803 million, with subscription ARR accelerating 27% to $636 million.
• SaaS ARR jumped 66% to $188 million, indicating strong growth in the SaaS segment.
• The company achieved record Q1 free cash flow margins while investing in growth initiatives.
• CommVault Systems Inc (NASDAQ:CVLT) was named the winner for Trailblazing Cyber Resilience by Cyber Defense Magazine, highlighting its leadership in cyber resilience.

Negative Points

• Customer support revenue was down 1% sequentially and year-over-year, indicating potential challenges in maintaining support revenue.
• Operating expenses increased by 15% to $137 million, driven by costs associated with events and higher commissions.
• The company faces a competitive landscape, particularly in the government sector, despite achieving FedRAMP High authorization.
• There is a sequential drop expected in subscription revenue for fiscal Q2, which may raise concerns about growth momentum.
• The macroeconomic environment remains uncertain, which could impact deal activity and pipeline discussions.

Q & A Highlights

Q: Can you discuss the current macro environment and customer reactions following the CrowdStrike outage? A: Sanjay Mirchandani, CEO, explained that the macroeconomic situation remains stable, and the pipeline looks strong. The CrowdStrike incident has heightened conversations around resilience, emphasizing the importance of having secure cloud capabilities like Air Gap Protect. This incident, though not malicious, underscores the need for resilience in trusted environments.

Q: Can you provide more details on the 127% net dollar retention rate and cross-sell opportunities with Metallic? A: Sanjay Mirchandani, CEO, noted significant growth in hybrid workloads and new offerings like Air Gap Protect and Active Directory. Danielle Abrahamsen, Chief Accounting Officer, added that cross-sell opportunities have increased from a quarter to a third of their expand revenue, driven by the unified Commvault cloud platform.

Q: How impactful are investments in the government vertical and Asia Pacific region? A: Sanjay Mirchandani, CEO, highlighted the importance of government markets, noting their FedRAMP High certification and partnerships like Carahsoft. In Asia Pacific, they are focusing on modest growth in regions like ANZ and Southeast Asia, with investments in security-focused field resources.

Q: Why is there a sequential drop in subscription revenue guidance for fiscal Q2? A: Danielle Abrahamsen, Chief Accounting Officer, explained that the drop is due to a smaller renewal pool in Q2 and the momentum in SaaS, which is recognized ratably. The guidance reflects the strong growth in SaaS ARR, despite the sequential decline.

Q: How is the Dell partnership progressing, and what is the pace of legacy displacement? A: Sanjay Mirchandani, CEO, stated that the Dell partnership is a long-term initiative targeting the Veritas Install Base. The pace of legacy displacement is increasing, driven by a focus on resilience and the need for comprehensive technology solutions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.