Commvault Announces Fiscal 2020 First Quarter Financial Results
TINTON FALLS, N.J., July 30, 2019 /PRNewswire/ --
First Quarter Highlights Include:
First quarter
GAAP Results:
Revenues
$162.2 million
Loss from Operations
$(6.7) million
Operating Margin (4.1)%
Diluted Loss Per Share $(0.15)
Non-GAAP Results:
Income from Operations (EBIT)
$15.5 million
EBIT Margin 9.6%
Diluted Earnings Per Share $0.27
Commvault (NASDAQ: CVLT) today announced its financial results for the first quarter ended June 30, 2019.
"During the quarter we made substantial progress in our efforts to simplify and improve execution," said Sanjay Mirchandani, Commvault's President and CEO. "Our foundation is solid and we now have the senior leadership team in place. I'm excited about the recent appointments of Riccardo, Sandra, and Ranga who will strengthen our revenue, customer success, and product agendas. The recent launch of our partner advantage program is a stellar example of how our focus on simplicity and execution will benefit partners and customers. I am confident that the journey we are on, and the changes we are making, will lead the company back to growth."
Total revenues for the first quarter of fiscal 2020 were $162.2 million, a decrease of 8% year over year and 11% sequentially. Total repeatable revenue (see Table IV) was $114.1 million, a decrease of 2% year over year. Subscription and utility annual contract value (ACV) grew 66% year over year to approximately $106 million. See Table IV for an explanation of ACV.
Software and products revenue was $63.7 million, a decrease of 15% year over year, and 21% sequentially.
Services revenue in the quarter was $98.5 million, a decrease of 3% year over year and 2% sequentially.
On a GAAP basis, loss from operations was $6.7 million for the first quarter compared to $6.8 million in the prior year. The first quarter GAAP results in fiscal 2020 and 2019 included $7.4 million and $11.4 million, respectively, 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 $15.5 million in the quarter compared to $22.8 million in the prior year.
For the first quarter of fiscal 2020, Commvault reported GAAP net loss of $6.8 million, or $0.15 per diluted share. Non-GAAP net income for the quarter was $12.7 million, or $0.27 per diluted share.
Operating cash flow totaled $31.1 million for the first quarter of fiscal 2020 compared to $24.8 million in the prior year quarter. Total cash and short-term investments were $451.1 million as of June 30, 2019 compared to $458.3 million as of March 31, 2019.
During the first quarter of fiscal 2020, Commvault repurchased approximately 830,000 shares of its common stock for $40.0 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."
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, non-GAAP diluted earnings per share and subscription and utility annual contract value (ACV). 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.
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 and 2020, Commvault also excluded restructuring and costs related to a non-routine shareholder matter 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. 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 and 2020 Commvault also excluded restructuring and costs related to a non-routine shareholder matter 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%.
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. 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 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, July 30, 2019, at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) 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 the recognized leader in data backup and recovery. 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, Commvault HyperScale, ScaleProtect, Commvault OnePass, Commvault Galaxy, Unified Data Management, QiNetix, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, IntelliSnap, Recovery Director, CommServe, CommCell, ROMS, APSS, Commvault Edge, Commvault GO, Commvault Advantage, Commvault Complete, Commvault Activate, Commvault Orchestrate, and CommValue 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.
Table I
Commvault Systems, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
2019 2018
---
Revenues:
Software and products $
63,674 $
75,050
Services 98,529 101,127
Total revenues 162,203 176,177
Cost of revenues:
Software and products 6,030 4,120
Services 22,690 23,486
Total cost of revenues 28,720 27,606
Gross margin 133,483 148,571
Operating expenses:
Sales and marketing 87,385 97,616
Research and development 23,580 24,097
General and administrative 22,507 23,239
Restructuring 4,079 7,895
Depreciation and amortization 2,606 2,533
Total operating expenses 140,157 155,380
Loss from operations (6,674) (6,809)
Interest income 1,923 891
Loss before income taxes (4,751) (5,918)
Income tax expense 2,095 2,649
Net loss $
(6,846) $
(8,567)
Net loss per common share:
Basic $
(0.15) $
(0.19)
Diluted $
(0.15) $
(0.19)
Weighted average common shares outstanding:
Basic 45,451 45,450
Diluted 45,451 45,450
T
able II
Commvault Systems, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, March 31,
2019 2019
ASSETS
Current assets:
Cash and cash equivalents $
320,821 $
327,992
Short-term investments 130,325 130,338
Trade accounts receivable 137,628 176,836
Other current assets 23,762 19,836
Total current assets 612,536 655,002
Property and equipment, net 120,629 122,716
Operating lease assets 17,945
Deferred commissions cost 32,487 33,619
Other assets 9,725 11,116
Total assets $
793,322 $
822,453
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $
971 $
2,186
Accrued liabilities 76,114 85,721
Current portion of operating lease liabilities 7,894
Deferred revenue 235,222 238,439
Total current liabilities 320,201 326,346
Deferred revenue, less current portion 96,633 99,257
Deferred tax liabilities, net 2,596 2,594
Long-term operating lease liabilities 11,618
Other liabilities 2,457 2,953
Total stockholders' equity 359,817 391,303
Total liabilities and stockholders' equity $
793,322 $
822,453
Table III
Commvault Systems, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended June 30,
2019 2018
---
Cash flows from operating activities
Net loss $
(6,846) $
(8,567)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and
amortization 2,918 3,059
Noncash stock-based
compensation 14,750 18,004
Deferred income taxes - (105)
Amortization of deferred
commissions cost 4,503 4,615
Impairment of operating
lease assets 718
Changes in operating assets and liabilities:
Trade accounts receivable 43,165 8,672
Operating lease assets and
liabilities, net 848
Other current assets and
Other assets (5,881) 2,919
Deferred commissions cost (3,369) (5,042)
Accounts payable (1,217) (376)
Accrued liabilities (10,038) (1,938)
Deferred revenue (7,922) 3,298
Other liabilities (489) 231
Net cash provided by
operating activities 31,140 24,770
Cash flows from investing activities
Purchase of short-term
investments (32,800) (11,252)
Proceeds from maturity of
short-term investments 32,813 33,135
Purchase of property and
equipment (841) (3,521)
Net cash provided by (used
in) investing activities (828) 18,362
Cash flows from financing activities
Repurchase of common stock (40,026) (25,015)
Proceeds from stock-based
compensation plans 663 13,398
Net cash used in financing
activities (39,363) (11,617)
Effects of exchange rate -
changes in cash 1,880 (10,387)
Net increase (decrease) in
cash and cash equivalents (7,171) 21,128
Cash and cash equivalents
at beginning of period 327,992 330,784
Cash and cash equivalents
at end of period $
320,821 $
351,912
Table IV
Commvault Systems, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures and Other Financial Information
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30,
2019 2018
---
Non-GAAP financial measures and reconciliation:
GAAP loss from operations $
(6,674) $
(6,809)
Noncash stock-based compensation (1) 14,382 17,094
FICA and payroll tax expense related to stock-based compensation (2) 415 1,083
Restructuring (3) 4,079 7,895
Non-routine shareholder matters (4) 3,303 3,549
Non-GAAP income from operations $
15,505 $
22,812
GAAP net loss $
(6,846) $
(8,567)
Noncash stock-based compensation (1) 14,382 17,094
FICA and payroll tax expense related to stock-based compensation (2) 415 1,083
Restructuring (3) 4,079 7,895
Non-routine shareholder matters (4) 3,303 3,549
Non-GAAP provision for income taxes adjustment (5) (2,611) (3,751)
Non-GAAP net income $
12,722 $
17,303
Diluted weighted average shares outstanding (6) 46,273 47,685
Non-GAAP diluted net income per share $
0.27 $
0.36
Three Months Ended June 30,
2019 2018
---
Subscription and Utility Software and Related Support Services $
32,289 $
29,070
Recurring Support and Services 81,845 87,478
Total repeatable revenue $
114,134 $
116,548
Percentage of Total Revenues 70 66
% %
Perpetual software and product revenue $
40,117 $
49,600
Other professional services 7,952 10,029
Total non-repeatable revenue $
48,069 $
59,629
Percentage of Total Revenues 30
% 34
%
Total Revenue (7) $
162,203 $
176,177
June 30, 2018 March 31, 2019 June 30, 2019
Subscription and Utility Annual Contract Value (8) $
64,000 $
105,000 $
106,000
Three Months Ended June 30, 2019
Americas EMEA APAC Total
Software and Products Revenue $
31,221 $
21,375 $
11,078 $
63,674
Customer Support Revenue 57,730 21,667 10,085 89,482
Professional Services 4,866 2,682 1,499 9,047
Total Revenue $
93,817 $
45,724 $
22,662 $
162,203
Three Months Ended June 30, 2018
Americas EMEA APAC Total
Software and Products Revenue $
42,116 $
22,025 $
10,909 $
75,050
Customer Support Revenue 60,426 20,359 9,621 90,406
Professional Services 5,785 3,226 1,710 10,721
Total Revenue $
108,327 $
45,610 $
22,240 $
176,177
Three Months Ended June 30, 2019
Sequential Year Over Year
Non-GAAP software and products revenue reconciliation
GAAP software and products revenue $
63,674 $
63,674
Adjustment for currency impact 319 1,505
Non-GAAP software and products revenue on a constant currency basis (9) $
63,993 $
65,179
Three Months Ended June 30, 2019
Sequential Year Over Year
Non-GAAP services revenue reconciliation
GAAP services revenue $
98,529 $
98,529
Adjustment for currency impact 519 2,311
Non-GAAP services revenue on a constant currency basis (9) $
99,048 $
100,840
Three Months Ended June 30, 2019
Sequential Year Over Year
Non-GAAP total revenue reconciliation
GAAP total revenues $
162,203 $
162,203
Adjustment for currency impact 838 3,816
Non-GAAP total revenues on a constant currency basis (9) $
163,041 $
166,019
Three Months
Ended June 30,
2019 2018
Non-GAAP free cash flow reconciliation:
Net cash provided by operating activities $
31,140 $
24,770
Purchase of property and equipment (841) (3,521)
Purchases for corporate campus headquarters (10) 1,855
Non-GAAP free cash flow $
30,299 $
23,104
Footnotes - Adjustments
(1) Represents noncash stock-based
compensation charges associated
with stock options, restricted
stock units granted and our
Employee Stock Purchase Plan.
Those amounts are represented as
follows:
Three Months Ended June 30,
2019 2018
Cost of services revenue $
690 $
756
Sales and marketing 7,646 9,524
Research and development 1,993 2,215
General and administrative 4,053 4,599
Stock-based compensation expense $
14,382 $
17,094
In the three
months ended June
30, 2019 and
2018, the table
above excludes
$368 and $910,
respectively, of
stock-based
compensation
expense related
to the Company's
restructuring
activities
described below
in footnote
three.
(2) Represents
additional FICA
and related
payroll tax
expenses incurred
by Commvault when
employees
exercise in the
money stock
options or vest
in restricted
stock awards.
(3) In fiscal 2019,
Commvault
initiated a
restructuring
plan to increase
efficiency in its
sales, marketing
and distribution
functions as well
as reduce costs
across all
functional areas.
These
restructuring
charges relate
primarily to
severance and
related costs
associated with
headcount
reductions, as
well as the
closure of
offices.
Restructuring
includes $368 and
$910 of stock-
based
compensation for
the three months
ended June 30,
2019 and 2018,
respectively,
related to
modifications of
awards granted to
former employees.
Management
believes, when
used as a
supplement to
GAAP results,
that the
exclusion of
these charges
will better help
investors and
financial
analysts
understand
Commvault's
operating results
and underlying
operational
trends as
compared to prior
periods.
(4) During fiscal 2019
and 2020
Commvault
incurred costs
related to a non-
routine
shareholder
matter. The
costs are for
professional fees
related to the
settlement
agreement with
the shareholder
and consulting
fees incurred
with the
operational
review which was
agreed to as part
of the
settlement.
Management
believes, when
used as a
supplement to
GAAP results,
that the
exclusion of
these costs will
better help
investors and
financial
analysts
understand
Commvault's
operating results
and underlying
operational
trends as
compared to prior
periods.
(5) The provision for
income taxes is
adjusted to
reflect
Commvault's
estimated non-
GAAP effective
tax rate of 27%.
(6) For GAAP purposes
the potentially
dilutive impact
of options and
shares associated
with our stock-
based
compensation
programs were
excluded from the
calculation of
GAAP loss per
share in the
periods ended
June 30, 2019 and
2018 because they
would have been
anti-dilutive.
For purposes of
non-GAAP income
per share the
impact of
dilutive options
and shares has
been included.
(7) This table
includes the
following
financial metric
that is derived
from Commvault's
GAAP recognized
revenue:
Subscription and
Utility Software
and Related
Support Services
- The amounts
included on this
line include a)
non-cancellable
term-based, or
subscription,
licenses
(inclusive of
both recognized
software and
recognized
maintenance and
support revenues)
that expire at
the end of the
contractual term;
and b) "pay-as-
you-go" utility
arrangements
based on product
usage (inclusive
of both
recognized
software and
maintenance and
support revenues)
that are
structured with
no guaranteed
minimums. The
amount includes
both Software and
Products Revenue
and Services
Revenue.
Recurring Support
and Services -
The amounts
included on this
line consist
primarily of
maintenance and
support revenues
associated with
the sale of
perpetual
software
arrangements.
This revenue is
included in
Services Revenue
on Commvault's
Consolidated
Statement of
Operations.
Perpetual Software
and Product
Revenues -The
amounts included
on this line are
primarily
associated with
the sale of
perpetual
software
transactions.
These revenues
are included in
Software and
Products Revenue
on Commvault's
Consolidated
Statement of
Operations.
Other Professional
Services -The
amounts included
on this line are
primarily
revenues
associated with
Commvault's
installation and
consultation
services. These
revenues are
included in
Services Revenue
on Commvault's
Consolidated
Statement of
Operations.
Management
believes that
also reviewing
these metrics, in
addition to GAAP
results, helps
investors and
financial
analysts
understand the
repeatable nature
of certain
revenue amounts
and trends as
compared to prior
periods.
Note that nearly
all of
Commvault's
software and
product revenue
is related to
solutions that
are run in the
customer's
environment.
Commvault
currently does
not have material
revenue related
to hosted, or
software as a
solution
products. As a
result, as
required under
ASC 606,
substantially all
of Commvault's
software and
product revenue
is recognized at
a point in time,
when it is
delivered to the
customer, and not
ratably over the
course of a
contractual
period. This is
the case for both
perpetual
software licenses
and subscription
software
licenses.
(8) This table
includes the
Subscription and
Utility Annual
Contract Value
(ACV) metric that
is comprised of:
a. Subscription ACV - the annualized
equivalent of the total contract
value (both software and related
support services) of all non-
cancellable subscription
agreements. Over the past nine
quarters, the weighted average
contract length of subscription
agreements has been approximately
three years. The total contract
value includes all active
contracts at the end of each
fiscal quarter.
b. Utility ACV - "pay-as-you-go"
utility arrangements based on
product usage (inclusive of both
software and related support
services) that are structured with
no guaranteed minimums. The
amounts included in Utility ACV
have been annualized based on the
actual reported quarterly amount
in the most recent fiscal quarter.
Management believes that reviewing
this ACV metric, in addition to
our GAAP results, helps investors
and financial analysts understand
the value of arrangements that may
potentially result in future
revenues. Commvault believes this
metric normalizes the variations
in contractual length among our
subscription and utility
transactions and will help
investors and analysts to track
Commvault's transition to more
potentially repeatable revenue
streams.
(9) Revenues on a
constant currency
basis are
calculated using
the average
foreign exchange
rates from a
previous period
and applying
these rates to
foreign-
denominated
revenues in the
corresponding
period of fiscal
2020. The
difference
between revenue
calculated based
on these foreign
exchange rates
and revenues
calculated in
accordance with
GAAP is listed as
Adjustment for
currency impact
in the table
above.
(10) In the first
quarter of fiscal
2019 Commvault
made a purchase
of land adjacent
to its global
corporate
headquarters.
Due to the non-
routine nature of
this transaction,
the amount has
been adjusted
from the
calculation of
non-GAAP free
cash flow.
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