Commvault’s Fiscal 2023 and Fourth Quarter Financial Results
The News: Commvault announced its fiscal 2023 fourth quarter financial results earlier this week. See the full earnings release from Commvault here.
Commvault’s Fiscal 2023 and Fourth Quarter Financial Results
Analyst Take: Data protection is crucial for C-Level executives, as data breaches and cyberattacks can have serious consequences for businesses results and overall brand perception. Not only can they result in the loss of sensitive information, but they can also damage a business’s reputation and lead to significant financial losses. By investing in data protection solutions, executives can help to mitigate these risks and ensure that their businesses are prepared for any potential threats. Commvault has long been a trusted partner for many large enterprises and government agencies in this space.
By the Numbers
For the fourth quarter of fiscal 2023, total revenues for Commvault were $203.5 million, 1% less than the same period last year. On a YoY constant currency basis, total revenue growth would have been up by 2%. During this time period, recurring revenues accounted for 85% of total revenue. In the full fiscal year (2023), total revenues were $784.6 million, 2% more than last year. On a YoY constant currency basis, total revenue growth would have been 6%.
Software and products revenue in the fourth quarter was $90.2 million, a decrease of 10 percent year over year. Revenue from larger deals – deals with greater than $0.1 million in software revenue – represented 72 percent of our software revenue in the three months that ended March 31, 2023. There were 187 larger deal transactions in the three months ended March 31, 2023, compared to 226 for the three months ended March 31, 2022. The average dollar amount of larger deal revenue transactions was $347,000 in the fourth quarter of fiscal 2023, which is a 6 percent increase from the prior-year quarter.
The full fiscal year’s software and products revenue was $355.1 million, flat from the year before. This would have grown by 4% on a constant currency basis. Services revenue in the fourth quarter was $113.2 million, an increase of 7% over the previous year. For the full fiscal year, services revenue was $429.5 million, up 4% over the previous year. This was driven by flagship Metallic as-a-service offerings, which we expect to feature more strongly going forward. On a YoY constant currency basis, the services revenue would have increased 11% in the fourth quarter and 9% for the full fiscal year.
In the fourth quarter, on a GAAP basis, loss from operations was $37.7 million, compared to income of $11.4 million in the prior year quarter. The year-over-year decline in GAAP EBIT was primarily attributable to a $53.5 million non-cash impairment charge related to the pending sale of Commvault’s corporate headquarters. An impairment charge is an accounting term that refers to the decrease in the value of an asset. Non-GAAP EBIT was $45.4 million in the quarter compared to $46.6 million in the prior year quarter.
Commvault’s financial results are a testament to the company’s focus on innovation and its ability to meet the evolving needs of its customers. While single-digit growth numbers are not headline-grabbing, we feel that growth in this segment during a tougher macro reflects sound execution. And while the single-digit growth results may not excite, we see the strong ARR growth in subscription and overall revenue (both in mid double-digit) to indicate that the company’s pivot to subscription is gathering steam. We also feel the company’s continued investments in its product portfolio, and the introduction of new features and capabilities will position Commvault to further help its customers better manage their data in a hybrid cloud environment.
And as mentioned above, the key driver and an important pivot for the company’s long-term growth has been its focus on subscription-based business. By offering customers a flexible, subscription-based pricing model, Commvault has been able to grow its recurring revenue and improve customer retention. During Q4 and throughout 2023 one key focus for the company was the addition of new customers to its subscription-based business, Metallic-as-a-Service, and we expect this trend to continue as the company increasingly focuses on this flagship product.
Another area of strength for Commvault is its partnership ecosystem. The company has built a strong network of partners, including major cloud providers like Microsoft Azure and Amazon Web Services, as well as leading hardware vendors like Dell EMC and HPE. These partnerships have enabled Commvault to extend the reach of its solutions and provide customers with a seamless data management experience across their entire infrastructure. For the company to continue to succeed in the quarters ahead, these partnerships need to deliver.
Commvault is well-positioned for continued growth and success in a market that is growing. The company’s focus on innovation and its commitment to meeting the evolving needs of its customers will be key drivers of its future success. Additionally, the company’s financial performance provides a solid foundation for future growth and investment. We need to see a continued focus and the coinciding growth of its subscription and overall ARR — specifically the Metallic business in future earnings announcements, as we believe these are directionally important and speak to the business’s long-term health.
In conclusion, Commvault’s Q4 and 2023 financial results highlight the company’s growth and strong performance across its business segments. In a tough industry with many incumbents as well as new cloud-based entrants, Commvault has its work cut out for it. However, by focusing on innovation, subscription-based business, and partnerships, Commvault is showing its ability to meet the evolving needs of its customers and drive strong financial results. With a solid foundation for future growth and investment, Commvault sits in a good position with the upside in its sights to deliver more significant and robust growth in the near to mid-term.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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