CommVault Systems, Inc. (CVLT)

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CommVault Systems, Inc. (CVLT)

Q3 2012 Earnings Call

October 29, 2012 8:30 AM ET


Michael Picariello – Director, IR

Bob Hammer – Chairman, President and CEO

Lou Miceli – CFO

Alan Bunte – COO


Joel Fishbein – Lazard

Aaron Rakers – Stifel, Nicolaus

Aaron Schwartz – Jefferies

Alex Kurtz – Sterne

Glenn Hanus – Needham

Greg Dunham – Goldman Sachs

Michael Turits – Raymond James

Ryan Bergan – Craig-Hallum



Good morning, ladies and gentlemen, and welcome to CommVault’s Second 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 second quarter 2013 earnings call. With me on the call are Bob Hammer, Chairman, President and Chief Executive Officer; Al Bunte, Chief Operating Officer; and Lou Miceli, Chief Financial Officer.

Before we begin, I’d like to remind everyone that statements made during this call, including in the question-and-answer 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 Investor Relations website.

On this conference call, we’ll provide non-GAAP financial results. A 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.

Bob Hammer

Thanks Mike. Good morning everyone and thanks for joining our second quarter earnings call a day earlier than expected, as everybody knows we have a little bit of weather here. In fact Al and I were part of the evacuees last night. We had to find some shelter somewhere else. And most of our office facility is shutdown, but it looks like we’re in good condition in our follow through on the call. I hope everybody on the call is safe and stays safe until this – the storm is over.

Regards to our quarter, we had another very solid quarter. Our positive results are indicative of continued good underlying demand and the strength of our product, services and distribution across all geographies. We saw strong growth in the Americas, Europe and our U.S. Federal margins. We are seeing a positive business momentum continuing into our Q3.

Let me briefly summarize our financial results. For the quarter, total revenues were $118.2 million, up 21% year-over-year and up 6% sequentially. Software revenue was $59.2 million, and grew 24% year-over-year and 9% sequentially. We also had an excellent results from our services and support organizations. Services revenue was $58.9 million, and grew 19% year-over-year and 3% sequentially.

For the quarter, non-GAAP operating income or EBIT was a record $28.8 million up 63% year-over-year. Non-GAAP EBIT margins were 24.4%. Non-GAAP diluted earnings per share for the quarter were $0.38.

Our 21% year-over-year revenue growth was primarily due to the combination of three major factors. Share increases in very large big data related enterprise deals and commercial and government accounts, penetration into the managed service provider market and the increasing recognition in the market of CommVault’s leading technology and support capabilities. These factors combined with good sales execution, have enabled us to significantly outpace the growth of the market and continue to pick up market share.

This past quarter’s earnings growth was also affected by the positive impact of significantly higher than planned and forecasted operating expense reductions from the successful implementation of cost saving initiatives, as well as below targeted spending on several investment initiatives.

We also have lower sales and marketing expense quarter-on-quarter, due to the significant expense we incurred in Q1 2013 related to our global sales kick-off. We are forecasting some positive impacts of the expense reductions initiatives to carry into Q3 and Q4. However, these savings will be partially offset by increasing the rate of our operating expense investments in the second half of FY2013. These investments are being made in order to better position the company to achieve its FY2014 revenue and earnings growth objectives.

Let me spend a minute speaking about the macro environment. The September quarter results of tech companies in general, and for our industry specifically indicated that there was a clear slowdown in IT spending and push-outs of larger deals. However, despite the apparent drop in industry spend we saw a good demand for our products across all geographies, vertical market segments and distribution channels. Our overall funnel and big deal pipeline growth indicate continued demand for our products in the December quarter.

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