Data protection heavyweight supplier Commvault has delivered an anaemic set of results for the first 2020 quarter.
Revenues fell eight per cent to $162.2m and the company made a net loss of $6.8m (-$8.6m). This is scant consolation for new CEO Sanjay Murchandani who said in the earnings call: “We are not pleased with our Q1 results.”
He joined in February this year and has now seen two sets of disappointing quarterly results.
CFO Brian Carolan said in the earnings call: “Software and products revenue was $63.7 million, which was down 15 per cent year-over-year … Our performance in the Americas was the primary reason for the year-over-year decline.” He also mentioned the “European macro environment as a headwind this quarter”.
Cash and short-term investments were approximately $451 million, down two per cent from the balance at March 31. Free cashflow was approximately $30 million for the quarter, up 31 per cent over the year.
The previous quarter’s numbers were lower than hoped for due to lower than expected revenues from large enterprise transactions and poor execution with the channel, particularly in the mid market. This time around they were attributed to poor execution again.
Specifically, Murchandani said: “We’ve had challenges with deal closure.”
New execs
Murchandani reckons he has the right executive team in place to recover things, with new chief sales guy Riccardo di Blasio front and centre.
Murchandani said the company has “acted quickly to put the right leaders in place and are actively increasing our quota-carrying salespeople. Riccardo working closely with the Americas team is clearly focused on this. Europe, our second largest market is an area for improvement. We saw large cross-border deals slow, which we believe is macro-related. We’re also seeing a steady stream of large 6 and 7-figure opportunities, which are more complex with larger closing cycles.”
Commvault’s strategy is based around operational simplification, innovation and execution. It’s also moving to a subscription business model and progress is good there, with the Annual Contract Value metric growing to $106 million, up 66 per cent from a year ago.
The firm is optimistic about its return to predictable growth because the deal funnel is full of prospects, a new partner program is in place and demand is strong.
Last quarter, customers had more than 500 petabytes in the cloud with Commvault. This has grown to more than 600 petabytes and has doubled in the past year. Also the average enterprise deal size was approximately $298,000 during the quarter, up 23 per cent over the prior year.
Looking ahead, Murchandani said: “Rob Kaloustian, a Commvault veteran, is driving our new business incubation team to test and launch an innovative new product next quarter.” This will be a “new SaaS offering that we will make available to beta customers in mid-August with the initial launch during Q3 in the U.S…In our early testing, it is literally provisioned and [started] backing up in minutes.”
At bottom?
Senior Wells Fargo analyst Aaron Rakers mailed his followers to say: “Commvault delivered another disappointing quarter with management pointing to very weak F1Q20 results…we’re frustrated with how the Commvault story has progressed.”
The next quarter could be poor too with the third fy2020 quarter perhaps showing sequential growth.
Rakers said: “Commvault believes 2HF2020 rev. will grow q/q; however, we think a cautious stance on F3Q20 should be considered as the company focuses on increasing Americas sales capacity and we await visible signs of improved execution on the recently (mid-July) introduced new Partner Advantage program.”
Jason Ader, an analyst at William Blair, told his subscribers: “The big question at this point is whether we have hit bottom on the numbers, especially with the new leadership team taking concrete steps to improve sales execution, drive partner enablement, and simplify operations. Our sense is that we are at or close to the bottom on software revenue (the key metric to track).”
He said: “Management believes that the first-half revenue results will set a quarterly trough level for the year, with a rebound in the second half expected to be driven by sales execution improvements.”
These he identified as better pipeline management, customer retention initiatives, an increase in productive quota-carrying reps, benefits from the new partner program and contribution from new products.
Commvault is still a show-me-you-can-do-it-story with possibly another poor quarter to come before revenue upturn begins.
