Restructuring pays off as Commvault delivers record quarter

Commvault has posted record quarter revenues and its biggest net income in five years.

The data protector and manager’s financial third quarter, ended December 31, 2018, saw revenues of $184.3m, up two per cent y-o-y, and$13.4m net income. This contrasts starkly with the $58.9m loss recorded a year ago but then that reflected US government corporation tax accounting changes.

The company is restructuring in response to the overtures of activist investor Elliott Management.  One initiative sees Bob Hammer, the CEO, agreeing to retire.

Bob Hammer

William Blair analyst Jason Ader commented: “The top-line improvement was driven mainly by a pickup in large enterprise deals (up 18 per cent.)”

He said: “This was the first clean quarter from Commvault in a while and suggests real progress with Commvault Advance, the company’s multi-year strategic initiative to simplify products, licensing models, and pricing, and to shift field resources toward supporting channel and alliance partners.” 

The chart shows how the quarter stacks up.

Subscription farming

Commvault has begun moving to subscription revenues and total repeatable revenue was $121.m, an increase of 15 per cent y-o-y. Software and products revenue was $84.5m, an increase of 4 per cent y-o-y. Subscription and utility annual contract value more than doubled year-over-year to approximately $90m.

Services revenue in the quarter was $99.8m,  up 1 per cent y-o-y. Operating cash flow totalled $31.1m,  compared to $31.2m a year ago.  Total cash and short-term investments were $457.9m at the end of the quarter.

Hammer said the company’s revenue performance, “coupled with our continued successful efforts to right-size the business, allowed us to continue to deliver significant year-over-year earnings growth … We believe Commvault is well positioned for both our fiscal Q4 and fiscal 2020.”

Commvault fourth quarter guidance was c.$189m. That would produce fiscal 2018 revenues of $718.6m, a record.

The company is looking for a new CEO, and Ader commented: “With respect to the CEO search, this appears to be the swan song earnings call for long-time CEO Bob Hammer, who commented that an announcement on a new CEO would come soon. … Mr. Hammer can now walk off into the sunset with a measure of gratification that his team’s business transformation efforts are bearing fruit.”