CommVault Systems, Inc. (CVLT)

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CommVault Systems, Inc. (CVLT)

F3Q13 Earnings Conference Call

January 30, 2013 08:30 AM ET


Michael Picariello - Director of Investor Relations

Robert Hammer - Chairman, President and Chief Executive Officer

Alan Bunte - Chief Operating Officer

Brian Carolan - Chief Financial Officer


Joel Fishbein - Lazard Capital Markets

Jason Ader - William Blair

Aaron Rakers - Stifel Nicolaus

Alex Kurtz - Sterne Agee

Eric Martinuzzi - Lake Street

Aaron Schwartz - Jefferies

Michael Turits - Raymond James

Andrew Nowinski - Piper Jaffray

Greg Dunham - Goldman, Sachs & Co.

Glenn Hanus - Needham & Company

Rajesh Ghai - Craig-Hallum Capital Group LLC

Brian Freed Wunderlich Securities, Inc.

Robert Breza – RBC Capital Market



Good morning, ladies and gentlemen, and welcome to CommVault’s Third Fiscal Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. Following today’s presentation instructions will be given for the question-and-answer session.

At this time for opening remarks and introductions, I would like to turn the call over to Mr. Michael Picariello, Director of Investor Relations. Please go ahead, sir.

Michael Picariello

Good morning. Thanks for dialing in today for our fiscal third quarter 2013 earnings call. With me on the call are Bob Hammer, Chairman, President and Chief Executive Officer; Al Bunte, Chief Operating Officer; and Brian Carolan, Chief Financial Officer.

Before we begin, I’d like to remind everyone that statements made during this call, including in the Q&A session at the end of the call that relate to future results and projections, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Actual results may differ materially due to a number of risks and uncertainties, which are discussed in our SEC filings and in the cautionary statement contained in our press release and on our website.

The company undertakes no responsibility to update the information in this conference call under any circumstance. Our earnings press release was issued over the Wire Services earlier today and it has also been furnished to the SEC as an 8-K filing. The press release is also available on our IR website.

On this conference call, we will provide non-GAAP financial results. The reconciliation between the non-GAAP and GAAP measures can be found on Table IV accompanying the press release and posted on our website. This conference call is also being recorded for replay and is being webcast. An archive of today’s webcast will be available on our website following the call.

I will now turn the call over to our CEO and President, Bob Hammer.

Robert Hammer

Thanks Mike. Good morning everyone and thanks for joining our fiscal third quarter 2013 earnings call. We had another very solid quarter setting records for revenues and earnings. We had a strong quarter in all aspects of our business and in all geographies. In addition, we have established good visibility entering into our Q4. Our positive results are a validation of our unique ability to address the changing data and information management needs of large commercial and government enterprises, as well as leading managed service providers.

Let me briefly summarize our Q3FY13 financial results. Total revenues were $128.1 million, up 24% year-over-year and up 8% sequentially. Software revenue was $65.9 million, and grew 28% year-over-year and 11% sequentially. Services revenue was $62.2 million and grew 19% year-over-year and 6% sequentially.

From an earnings perspective, operating income or EBIT was $29.8 million, up 52% year-over-year. EBIT margins were 23.3%. Diluted earnings per share for the quarter were $0.39. We generated $27.5 million of cash flow from operations during the quarter.

Let me talk about our growth drivers. Our 28% year-over-year license revenue growth for the quarter was primarily due to our ability with Simpana 9 to better meet the needs of large commercial and government enterprise customers over implementing global shared service models. Outstanding sales execution, contribution from large managed service providers, highly differentiated support and services, and increased market awareness and industry recognition. It is important to note that license revenues generated from Simpana 9 in our core data management market will continue to be the primary driver of FY13Q4 growth and FY14 license revenue growth. Simpana 10, which I will talk about in a little more detail later, will significantly enhance Simpana 9’s industry leading value proposition in our core business and enable us to begin to penetrate other data-related market segments.

Let me spend a minute speaking about the macroeconomic environment. Current macroeconomic indicators point to a generally lackluster global economy in the first half of calendar 2013 with improvements expected in the second half. Specifically, we are assuming the following: The European economy will remain weak, the US economy will be slow in the first half of the year, even though there is continuing underlying improvement and we expect to see improvements in the Asian economies, particularly in China. In addition, we believe continuing uncertainty will have a negative impact on capital spending in both the US and in Europe. In contrast to the lackluster macro environment we continue to see good underlying demand for our products across all geographies and vertical market segments. What we know we are not immune to the broader macroeconomic uncertainty and remain focus on the possibility of a slowdown. We also expect to see cutbacks in the US Federal spending this quarter.

Now, let me address our current outlook. We had an excellent first nine months of FY13, in which revenues grew 22% year-over-year. License revenues grew 25% and non-GAAP EBIT increased 55% year-over-year. As of today we have seen limited negative impact to our business from the macroeconomic environment. Our visibility going to Q4 remains solid. We are focused on building our funnels for Q1 and Q2 FY14 and ensuring the quality of those funnels to mitigate any potential economic headwinds. In addition, we are accelerating our investment in sales capacity.

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