Q4 2024 Commvault Systems Inc Earnings Call

Operator: Thank you for standing by, and welcome to the CommVault Q4 FY 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by and welcome to the Commvault Q4, FY 'twenty 'twenty four earnings conference call.

Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Finally, a reminder that this conference is being recorded. I would now like to turn the conference over to Mike Melnyk, Head of Investor Relations. Please go ahead.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the star one again.

Finally, I reminded that this conference is being recorded.

I would now like to turn the conference over to Mark Melnyk head of Investor Relations. Please go ahead.

Michael John Melnyk: Good morning, and welcome to our earnings conference call. I'm Michael Melnyk, Head of Investor Relations, and I'm joined by Sanjay Mirchandani, CommVault CEO, and Gary Merrill, CommVault CFO. An earnings presentation with key financial and operating metrics will be posted on the Investor Relations website for reference. Statements made on today's call will include forward-looking statements about CommVault, future expectations, plans, and prospects. All such forward-looking statements are subject to risk, uncertainties, and assumptions; please refer to the cautionary language in today's earnings release and CommVault's most recent periodic reports filed with the SEC for discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in the forward-looking statement. CommVault does not assume any obligation to update these statements. During this call, CommVault's financial results are presented on a non-GAAP basis. Reconciliation between the non-GAAP and GAAP measures can be found on our website.

Michael John Melnyk: Good morning, and welcome to our earnings Conference call I'm, Michael Melnyk head of Investor Relations and I'm joined by Sanjay Mirchandani, Commvault, CEO and Gerry Commvault CFO and earnings presentation with key financial and operating metrics posted on the Investor Relations website for reference.

Statements made on today's call will include forward looking statements about commvault future expectations plans and prospects all such forward looking statements are subject to risks.

Michael John Melnyk: Certainties and assumptions please refer to the cautionary language in today's earnings release Commvault. Most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results could be materially different from those contemplated in the forward looking statements.

Commvault does not assume any obligation to update these statements.

Michael John Melnyk: During this call Commvault financial results are presented on a non-GAAP basis, a reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank.

Michael John Melnyk: Thank you again for joining us. Now I'll turn it over to Sanjay for his opening remarks. Sanjay. Thank you, Mike.

Michael John Melnyk: Thank you again for joining US now I will turn it over to Sanjay for his opening remarks Sanjay. Thank.

Thank you Mike Good morning, and thanks for joining us today.

Sanjay Mirchandani: Good morning, and thanks for joining us today. Q4 was an outstanding quarter, capping a breakout year for CommVault and setting the stage for fiscal year 25 and beyond. We ended our fiscal year with continued strong momentum across all primary KPIs. Highlights from Q4 include: Total revenue increased 10% to $223 million. Total ARR rose 15% to $770.

Sanjay Mirchandani: Q4 was an outstanding quarter capping a breakout year for Commvault and setting the stage for fiscal year 'twenty five and beyond.

We ended our fiscal year with continued strong momentum across all primary kpis highlight from Q4 include <unk>.

Sanjay Mirchandani: Total revenue increased 10% to $223 million.

Sanjay Mirchandani: Total ADR rose, 15% to $770 million.

Sanjay Mirchandani: Subscription ARR increased 25% to nearly 600 million. SAS ARR jumped 65% to 168 million, and we closed the year with over 5,000 SAS customers. And we did this properly.

Subscription <unk> increased 25% to nearly $600 million.

Sanjay Mirchandani: SaaS IRR jumped 65% to $168 million and we closed the year with over 5000, SaaS customers and we did this profitably.

Sanjay Mirchandani: Our Q4 and fiscal year results shine a bright light on the critical role CommVault plays in a world dominated by ransomware attacks and cybercrime. Organizations need to know that when they're hit, they can recover. This is what we empower our customers to do. Be resilient and recover.

Sanjay Mirchandani: Our Q4 and fiscal year results Shine a bright light on the critical role Commvault plays in a world dominated by ransomware attacks and cyber threats.

Sanjay Mirchandani: Organizations need to know that when they hit they can recover.

Sanjay Mirchandani: This is what we empower our customers to be resilient and the cup.

Sanjay Mirchandani: Our financial results speak to the multi-year journey we started five years ago. When I joined CommVault, I said the company had great bones, with a strong financial foundation and best-in-class technology. And we had a tremendous opportunity to unlock a new level of growth within the company. With that goal in mind, we reinvigorated our brand and go-to-market strategy, strengthened our partner ecosystem and expanded our routes to market, and we doubled down on CommVault's core strengths innovation.

Our financial results speak to the multiyear journey, we started five years ago.

Sanjay Mirchandani: When I joined Commvault I said the company had great bonds with a strong financial foundation and best in class technology.

Sanjay Mirchandani: And we had a tremendous opportunity to unlock a new level of growth within the company.

Sanjay Mirchandani: With that goal in mind, we reinvigorated our brand and go to market motion.

Sanjay Mirchandani: Lengthened our partner ecosystem and expanded our routes to market and we doubled down on Commvault core strength innovation.

Sanjay Mirchandani: To that point, we launched a hyper-growth SaaS offering that is one of the fastest growing of its kind in the industry today. And we transformed our business model from legacy perpetual to modern subscription and SaaS. We did all of this while focusing the company on sustainable and profitable growth with some notable results. For example, over the past three years, since fiscal year 22, total ARR increased at a 15% clipper.

To that point, we launched a hyper growth SaaS offering that is one of the fastest growing up its kind in the industry today.

Sanjay Mirchandani: And we transformed our business model from legacy perpetual modern subscription and SaaS.

Sanjay Mirchandani: We did all of this while focusing the company to sustainable and profitable growth with some notable results over.

Sanjay Mirchandani: Over the past three years since fiscal year 'twenty to total <unk> increased at a 15% CAGR.

Sanjay Mirchandani: Subscription ARR grew at a 31% clip, and ARR from a hyper-growth SaaS offering more than tripled. We consistently delivered profit margins of 20% or better. We generated over $500 million of free cash and returned over $600 million of cash to shareholders through stock repurchase. I'm extremely proud of what we've accomplished and would like to thank our customers, partners, and employees for their trust and commitment to CommVault. Our journey is only getting more exciting. In November, we shifted our company and everything it represents to cyber-resilience. As I alluded to previously...

Sanjay Mirchandani: Subscription <unk> grew at a 31% CAGR and from a hyper growth SaaS offering more than tripled.

Sanjay Mirchandani: We consistently delivered profit margins of 20% or better we generated over $500 million of free cash and returned over $600 million of cash to shareholders through stock repurchases.

I'm extremely proud of what we've accomplished and wed like to thank our customers partners and employees for their trust and commitment to Commvault.

Sanjay Mirchandani: Our journey is only getting more excited.

In November we shifted our company and everything had represented to cyber resilience.

Sanjay Mirchandani: As I alluded to previously the biggest challenge organizations face today is the unrelenting breadth and scale of cyber attacks.

Sanjay Mirchandani: The biggest challenge organizations face today is the unrelenting breadth and scale of cyber attacks. We're talking automated, intelligent, and state-sponsored. These attacks put immense pressure on CISOs, the finance suite, and the board to rapidly recover and be resilient. This is exactly what we enable with our CommVault Cloud Cyber Resilience Platform. For CommVault Cloud, we offer autonomous recovery so that customers can recover their environments at scale; customers can proactively perform health checks and detect anomalies and threats.

Sanjay Mirchandani: <unk> automated intelligent and state sponsored attacks. These attacks put immense pressure in <unk> the fee suite and the board to rapidly recover.

Sanjay Mirchandani: Be resilient.

Sanjay Mirchandani: This is exactly what we enable with our Commvault cloud cyber resilience platform.

Sanjay Mirchandani: So a combo of cloud we offer economist recovered so that customers can recover their environments at scale.

Sanjay Mirchandani: Customers can proactively perform health checks and detect anomalies and threats.

Sanjay Mirchandani: They can utilize our AI technology to enhance the recovery process, and they can secure and recover their data across any workload, any infrastructure, and from any location to any location, all at the lowest possible TCO. One of our marquee clients this quarter is Albertsons Company, a Fortune 100 grocer that migrated all its apps and infrastructure into the cloud. The retailer wanted to strengthen its cyber resiliency and implemented CommVault's unique and differentiated platform to provide additional security, recovery, workload protection, and cloud integration. Last year was a particularly difficult year for hospital systems, as cyber and ransomware attacks nearly doubled.

Sanjay Mirchandani: So you can utilize.

Sanjay Mirchandani: Hi, technology to enhance the recovery process and they can secure and recover they data across any workload any infrastructure and from any location to any location all at the lowest possible tcl.

Sanjay Mirchandani: One of our marquee clients this quarter is albertsons companies.

Sanjay Mirchandani: A fortune 100 grocer that migrated all their apps and infrastructure into the cloud.

The retailer wanted to strengthen the cyber resiliency and implemented combos unique and differentiated platform to provide additional security recovery workload protection and cloud integration.

Sanjay Mirchandani: Last year was a particularly difficult year for hospital systems, as cyber and ransomware attacks nearly doubled with.

Sanjay Mirchandani: With the risk of an attack top of mind, a large network of hospitals in Latin America was concerned about their ability to recover from a cyber attack. With CommVault, they have peace of mind that they can easily and quickly recover if they are hit. With one platform, they can manage their on-premises, remote, and cloud data, and we protect an immutable copy of the data, which is critical for recovery. These are just two examples of why we're winning in the market and are frequently chosen over competitive offers.

Sanjay Mirchandani: With the risk of an attack top of mind, a large network of hospitals in Latin America was concerned about their ability to recover from a cyber attack.

Sanjay Mirchandani: With Commvault they have peace of mind that they can easily and quickly recover of hips.

Sanjay Mirchandani: With one platform they can manage their on prem remote and cloud data and we've protected the beautiful copy of the data which is critical for recovery.

Sanjay Mirchandani: These are just two examples of why we're winning in the market and are frequently chosen over competitive offerings, but.

Sanjay Mirchandani: But we're not stopping there; we're taking recovery even further with CommVault cleanroom recovery. Yesterday, we announced how this new and unique offering empowers organizations to be ready to recover by providing a clean, isolated, and on demand recovery location in the cloud. They can spin up as many workloads as they need. Cleanroom Recovery also enables users to proactively test their response plans so they can quickly recover when bad actors strike. Building on these unrivaled capabilities, two weeks ago, we closed on the acquisition of a practice.

Sanjay Mirchandani: But we're not stopping there we're taking recovery, even further with commvault clean room recovery.

Sanjay Mirchandani: Yesterday, we announced how does new and unique offering empowers organization to be ready to recover by providing a clean isolated and on demand recovery location in the cloud that can spin up as many workloads have been cleaned.

Clean room recovery also enables users to proactively tapped the response plans.

Or they could quickly recover when bad actors Stryker.

Sanjay Mirchandani: Building on these unrivalled capabilities two weeks ago, we closed on the acquisition of our products.

Sanjay Mirchandani: With this technology, customers will be able to rapidly discover, rebuild, and get their critical cloud applications and production infrastructure fully operational after an outage or cybercrime. With Pranex and CommVault in the cloud, this rebuild will take minutes or hours rather than days or weeks. Also, in the unfortunate event of an attack, time is money. By marrying CommVault's extensive risk readiness and recovery capabilities with Apranex's cloud-native rebuild capabilities, we help customers shorten recovery times after an attack.

With this technology customers will be able to rapidly discover rebuilt and get that critical cloud applications and production infrastructure fully operational after an outage or cyber attack.

With the Phoenix and Carbo cloud this rebuild will take minutes or hours rather than days or weeks.

Sanjay Mirchandani: Also in the unfortunate event of an attack time.

<unk> is money.

Sanjay Mirchandani: By marrying Commvault extensive risk readiness and recovery capabilities with our products as cloud native lethal capabilities, we help customers shorten recovery times after an attack this.

Sanjay Mirchandani: This takes cyber resilience to a whole new level. In closing, I believe we are the best company with the best people and by far the best platform for cyber resilience in the industry. With CommVault Cloud, we believe that we can offer the most comprehensive AI-enabled platform for CISOs and CIOs to work together. It was engineered with the hybrid enterprise in mind to enable customers to manage their resilience across any workload environment or location.

Sanjay Mirchandani: This takes cyber resilience to a whole new level.

Speaker Change: In closing I believe we are the best company with the best people and by far the best platform for cyber resilience in the industry.

With Cabo cloud, we believe that we can offer the most comprehensive AI enabled platform for <unk> to work together.

Speaker Change: It was engineered with the hybrid enterprise in mind to enable customers to manage their resilience across any workload environment all locations. It's.

Sanjay Mirchandani: It's available as software, SaaS, or both. That way, if our customers suffer an attack, we help them to confidently and quickly recover their business and stay resilient. We believe fiscal year 25 will be the year for CommVault to continue accelerating its growth. With that, I'll turn it over to Gary to discuss the numbers and provide more insights on our forward outlook.

Speaker Change: It's available as software SaaS or both.

Speaker Change: That way, if our customer suffer an attack we help them to confidently and quickly recover their business and stay resilient.

Speaker Change: We believe fiscal year 'twenty five we'll be 30 year for Commvault to continue accelerating our growth with that I'll turn it over to Gary to discuss the numbers and provide more insights on our forward outlook Gary.

Gary: Thank you Sanjay.

Gary Merrill: As Sanjay mentioned, we closed the fiscal year with strong momentum, with all of our key primary metrics coming in ahead of expectations. Our cyber resilience platform and related messaging is responding in the market, and our team executed in the field, driving another quarter of double-digit revenue growth. I'll recap Q4 and the full fiscal year 24 results before discussing our outlook for fiscal year 25. As a reminder, all growth rates are on a year-over-year basis unless otherwise noted.

Gary: As Sandy mentioned, we closed the fiscal year with strong momentum with all of our key primary metrics coming in ahead of expectations.

Gary: Our cyber resilience platform and related messaging is resonating in the market and our team executed in the field.

Gary: Driving another quarter of double digit revenue growth.

Speaker Change: I'll recap Q4, and the full fiscal year 'twenty for results.

Speaker Change: Before discussing our outlook for fiscal year 'twenty five.

Speaker Change: As a reminder.

Speaker Change: All growth rates are on a year over year basis, unless otherwise noted.

Gary Merrill: Total revenue grew 10% to $223 million, driven by a 27% increase in subscription revenue, which now exceeds 50% of total revenue. Subscription revenue growth was fueled by increased contributions from our SAAS portfolio and solid double-digit growth in term software licensing. Our software revenue growth reflected a healthy balance between renewals and our strongest land and expand quarter of the fiscal year. Once again, we saw improved close rates.

Speaker Change: Total revenue grew 10% to $223 million.

Speaker Change: Driven by a 27% increase in subscription revenue.

Speaker Change: Which now exceed 50% of total revenue.

Speaker Change: Subscription revenue growth was fueled by increased contributions from our SaaS portfolio and solid double digit growth in term software licenses.

Speaker Change: Our software revenue growth reflected a healthy balance between renewals and our strongest land and expand quarter of the fiscal year.

Speaker Change: Once again, we saw improved close rates and.

Gary Merrill: In revenue from term software transactions, over $100,000, revenue increased 13% as we close an accelerated volume of larger deals. From a geographic perspective, both the Americas and international regions had strong performance, with both regions posting double-digit term software growth. Our Americas region delivered its best new customer acquisition quarter of the year as our cyber resiliency platform gained additional traction in the enterprise market. Q4 perpetual license revenue was flat sequentially at $15 million, as perpetual licenses are generally sold in limited verticals and geographies. We expect the headwinds from perpetual license sales to diminish in fiscal year 25 and beyond.

Speaker Change: And revenue from term software transactions over $100000 increased 13% as we close and accelerated volume of larger deals.

Speaker Change: From a geographic perspective, both the Americas and international regions had strong performance.

Speaker Change: With both regions posting double digit term software growth.

Speaker Change: Our Americas region delivered its best new customer acquisition quarter of the year as our cyber resiliency platform gained additional traction in the enterprise market.

Speaker Change: Q4, perpetual license revenue was flat sequentially at $15 million.

Speaker Change: As perpetual licenses are generally sold and limited verticals and geographies.

Speaker Change: We expect the headwinds from perpetual license sales to diminish in fiscal year, 'twenty five and beyond.

Gary Merrill: Q4 Customer Support Revenue, which includes support for both our term-based and perpetual software licenses, was $77 million, flat sequentially and year-over-year, for the full year. However, customer support revenue from terms, software, and related arrangements accelerated to 47% of total customer support. This compares to just 40% in fiscal year 23, and we expect customer support revenue from term-based software licenses to become the majority of our customer support revenue in fiscal year 25, driven by the attached on-term software license group. Now, I'll discuss ARR with you.

Q4 customer support revenue.

Speaker Change: Which includes support for both our term based and perpetual software licenses with $77 million flat sequentially and year over year.

For the full year.

Speaker Change: Customer support revenue from term software and related arrangements accelerated to 47% of total customer support.

Speaker Change: This compares to just 40% in fiscal year 'twenty three.

Speaker Change: And we expect customer support revenue from term based software licenses to become the majority of our customer support revenue in fiscal year 'twenty five.

Speaker Change: Driven by the attach on term software license growth.

Speaker Change: Now I'll discuss <unk>.

Gary Merrill: Q4 total ARR was $770 million, an increase of 15% year over year, which reflects the underlying strength of our business when our revenue is presented on an annualized basis. Subscription revenue, including term-based licenses and SAS contracts grew 25% year-over-year to $597 million. This includes $168 million of SAS ARR, which jumped 65% from a year ago on a quarter-over-quarter basis. Q3 to Q4 fast AR growth was impacted by a few million dollars of foreign exchange headwinds, as the U.S. dollar strengthened primarily versus the euro in fiscal Q4. On a constant currency basis, we added approximately $18 million of net new SAAS customers in both fiscal Q3 and fiscal Q4 as the underlying strength of our SAAS business continues.

Speaker Change: Q4, total IRR with $770 million, an increase of 15% year over year.

Which reflects the underlying strength of our business when our revenue with presented on an annualized basis.

Speaker Change: Subscription <unk>.

Speaker Change: Including term based licenses and SaaS contracts grew 25% year over year to $597 million.

Speaker Change: This includes $168 million of SaaS AAR.

Speaker Change: Which jumped 65% from a year ago.

Speaker Change: On a quarter over quarter basis Q3, the Q4, SaaS AOR growth was impacted by a few million dollars of foreign exchange.

Speaker Change: <unk> headwinds as the U S dollar strengthened primarily versus the euro in fiscal Q4.

Speaker Change: On a constant currency basis, we added approximately $18 million of net new SaaS <unk>.

In both fiscal Q3 and fiscal Q4.

Speaker Change: The underlying strength of our SaaS business continues.

Gary Merrill: New SAS ARR contributed two-thirds of our total ARR growth for the full fiscal year 24, and SAS ARR now represents 22% of total ARR compared to just 15% a year ago. From a customer perspective, existing customer expansion was strong, with Q4 SaaS net dollar retention of 123%, being benefited by both upsell and cross-sell activity.

Speaker Change: New SaaS <unk> contributed two thirds of our total AOR growth for the full fiscal year 'twenty four.

<unk> now represents 22% of total IRR compared to just 15% a year ago.

Speaker Change: From a customer perspective existing customer expansion was strong with Q4 SaaS net dollar retention of 123%.

Speaker Change: Being benefited by both upsell and cross sell activities.

Speaker Change: Now I'll discuss expenses and profitability.

Gary Merrill: Now I'll discuss expenses and profitability. Fiscal Q4 gross margins were 83.2%, an increase of 30 basis points sequentially, reflecting the healthy mix of term software gross margin leverage and continued SAS Gross Margin Improvement. Fiscal Q4 operating expenses increased 13% to $139 million, reflecting higher year-end commissions and bonuses against a record revenue quarter. We ended the quarter with approximately 2,900 employees, which was flat sequentially and an increase of 4% year over

Speaker Change: Fiscal Q4 gross margins were 83, 2%.

Speaker Change: An increase of 30 basis points sequentially.

Speaker Change: Reflecting the healthy mix of term software gross margin leverage.

Speaker Change: And continued SaaS gross margin improvement.

Speaker Change: Fiscal Q4 operating expenses increased 13% to $139 million.

Speaker Change: Reflecting higher year end commissions and bonuses against a record revenue quarter.

Speaker Change: We ended the quarter with approximately 2900 employees.

Speaker Change: Which was flat sequentially.

Speaker Change: And an increase of 4% year over year.

Gary Merrill: Non-gap EBIT for Q4 was $45 million, and non-gap EBIT margins were 20.2%. Our Q4 free cash flows grew 18% year-over-year to $79 million, reflecting continued growth in fast-deferred revenue and strength of our software subscription business, which typically includes upfront payment on multi-year contracts. In Q4, we repurchased $50 million of stock under our repurchase program.

Speaker Change: non-GAAP EBIT for Q4 was $45 million and non-GAAP EBIT margins were 22%.

Speaker Change: Our Q4 free cash flows grew 18% year over year to $79 million.

Speaker Change: Reflecting continued growth in SaaS deferred revenue.

Speaker Change: And strength of our software subscription business, which typically include upfront payment on multiyear contracts.

Speaker Change: In Q4, we repurchased $50 million of stock under our repurchase program.

Gary Merrill: Now, I'll discuss the full year fiscal 24 results. Total revenue increased 7% to $839 million, driven by double-digit growth in the second half of the year. We are pleased with the acceleration in total revenue growth throughout the fiscal year, and we expect our business momentum to continue into fiscal year 25. Subscription revenue increased 23% to $429 million, crossing over 50% of our total revenue. Fiscal Year 24 Operating Expenses, for 61% of total revenue, compared to 62% in the prior year, demonstrating operating defense leverage in our responsible growth model.

Now I'll discuss the full year fiscal 'twenty four results.

Speaker Change: Total revenue increased 7% to $839 million.

Speaker Change: Driven by double digit growth in the second half of the year.

Speaker Change: We are pleased with the acceleration in total revenue growth throughout the fiscal year, and we expect our business momentum to continue into fiscal year 'twenty five.

Speaker Change: Subscription revenue increased 23% to $429 million.

Speaker Change: <unk> over 50% of our total revenue.

Speaker Change: Fiscal year 'twenty four operating expenses were 61% of total revenue.

Speaker Change: Compared to 62% in the prior year.

Speaker Change: Demonstrating operating expense leverage and a responsible growth model.

Gary Merrill: Full year, non-GAAP EBIT grew 11% to $177 million, and non-gas EBIT margins improved 70 basis points to 21.1 percent. Moving to some key balance sheet and cash flow metrics, we ended the quarter with no debt and $313 million in cash, with approximately $100 million in the United States. For fiscal 24, free cash flows improved 20% year over year, reaching a milestone of $200 million for the full fiscal year. We also returned $184 million to shareholders as part of our share repurchase program, representing 92% of free cash flow. The average price of shares we repurchased during fiscal year 24 was $74.

Speaker Change: Full year, non-GAAP, EBIT grew 11% to $177 million.

Speaker Change: And non-GAAP EBIT margins improved 70 basis points to 21, 1%.

Speaker Change: Moving to some key balance sheet and cash flow metrics.

Speaker Change: We ended the quarter with no debt and $313 million in cash.

Speaker Change: With approximately $100 million in the United States.

Speaker Change: Full year fiscal 'twenty four free cash flows improved 20% year over year, reaching a milestone of $200 million for.

For the full fiscal year.

Speaker Change: We also returned $184 million to shareholders as part of our share repurchase program.

Speaker Change: Representing 92% of free cash flow.

Speaker Change: Our average price of shares we repurchased during fiscal year 'twenty four with $74.

Gary Merrill: Now, I'll discuss our outlook for fiscal Q1 and the full fiscal year 25. With our subscription software evolution complete, we are now focused on accelerating our total revenue growth rate while continuing to generate strong free cash flows and provide an attractive capital return to our shareholders. For Fiscal Q1, we expect Subscription revenue, which includes both the software portion of term-based licenses and FAFSA, to be $116 to $119 million. This represents 21% year-over-year growth at the midpoint. As a result, we expect total revenue to be $213 to $216 million, with growth of 8% at the midpoint.

Speaker Change: Now I'll discuss our outlook for fiscal Q1, and the full fiscal year 'twenty five.

With our subscription software evolution complete.

Speaker Change: We are now focused on accelerating our total revenue growth rate, while continuing to generate strong free cash flows.

Speaker Change: And provide an attractive capital return to our shareholders.

Speaker Change: For fiscal Q1, we expect subscription revenue.

Speaker Change: Which includes both the software portion of term based licenses and SaaS to be $116 million to $119 million.

Speaker Change: This represents 21% year over year growth at the midpoint.

Speaker Change: As a result, we expect total revenue to be $213 million to $216 million with growth of 8% at the midpoint.

Gary Merrill: At these revenue levels, we expect Q1 consolidated gross margins to be in the range of 81% to 82%. We expect Q1 non-GAAP EBIT margins to be in the range of 18% to 19%. Q1 operating expenses will include approximately 200 basis points of investments related to a live fiscal year sales kickoff that occurred earlier this month and our inaugural appearance at the RSA conference in May, both of which did not occur in the prior year. Our projected diluted share count for fiscal Q1 is approximately 45 million shares.

Speaker Change: At these revenue levels, we expect Q1 consolidated gross margin to be in the range of 81% to 82%.

Speaker Change: We expect Q1, non-GAAP EBIT margins to be in the range of 18% to 19%.

Q1 operating expenses will include approximately 200 basis points of investments related to ally fiscal year sales kickoff that occurred earlier this month.

Speaker Change: Our inaugural appearance at the RSA conference in May both of which did not incur in the prior year.

Speaker Change: Our projected diluted share count for fiscal Q1 is approximately 45 million shares.

Gary Merrill: Now, I want to give our initial outlook for the full fiscal year 25. We expect fiscal year 25 total AR growth of 14% year over year, and we expect subscriptions to ARR to increase in the range of 21% to 23% year over year. From a revenue perspective, we expect subscription revenue to be in the range of $514 to $518 million, growing 20% year-over-year at the midpoint, with strong contribution from both Term Software Licenses and SAS.

Speaker Change: Now I want to give our initial outlook for the full fiscal year 'twenty five.

We expect fiscal year 'twenty, five total AOR growth of 14% year over year.

Speaker Change: We expect subscription IRR to increase in the range of 21% to 23% year over year.

Speaker Change: From a revenue perspective, we expect subscription revenue to be in the range of $514 million to $518 million.

Speaker Change: Around 20% year over year at the midpoint with.

Speaker Change: With strong contribution from both term software licenses and SaaS.

Gary Merrill: We expect total revenue growth to accelerate and be in the range of $904 to $914 million, an increase of 8% at the midpoint, moving to full year fiscal 25 margin, EBIT, and cash flow outlook. We expect gross margins to be in the range of 81.5 percent to 82.5 percent, inclusive of the accelerating contribution of our fast business. We also expect non-GAAP EBIT margins to be in the range of 20% to 21%, including the Q1 event costs that did not occur in the prior year and certain focused investments to accelerate our revenue momentum. Operating margins should be seasonally stronger in the second half of the fiscal year compared to the first.

Speaker Change: We expect total revenue growth to accelerate and be in the range of $904 million to $914 million, an increase of 8% at the midpoint.

Speaker Change: Moving to full year fiscal 'twenty, five margin EBIT and cash flow outlook.

Speaker Change: We expect gross margins to be in the range of 81, 5% to 82, 5%.

Speaker Change: Inclusive of the accelerating contribution of our SaaS business.

Speaker Change: We also expect non-GAAP EBIT margins to be in the range of 20% to 21%.

Speaker Change: Including the Q1 event costs that did not occur in the prior year and certain focused investments to accelerate our revenue momentum.

Speaker Change: Operating margins should be seasonally stronger in the second half of the fiscal year compared to the first half.

Operator: We expect full-year free cash flows of at least $200 million. Our board of directors recently increased the authorization on our share repurchase program to $250 million, and we expect to continue with our existing practice of repurchasing at least 75% of our annual free cash flows. In fiscal year 25, we are also lowering our non-GAAP tax rate from 27% down to 24%. We believe that a 24% rate more closely aligns with our effective tax rate expectations over the next few years, given the current cyber market tailwind, the predictability of our large and growing subscription revenue base, and our execution momentum in the field.

Speaker Change: We expect full year free cash flows of at least $200 million.

Speaker Change: Our board of Directors recently increased the authorization on our share repurchase program to $250 million.

Speaker Change: We expect to continue with our existing practice of repurchasing at least 75% of our annual free cash flows.

Speaker Change: In fiscal year 'twenty five we are also lowering our non-GAAP tax rate from 27% down to 24%.

Speaker Change: We believe that a 24% rate more closely aligned with our effective tax rate expectations over the next few years.

Speaker Change: Given the current cyber market tailwind.

Speaker Change: The predictability of our large and growing subscription revenue base and our execution momentum in the field.

Operator: I'd like to discuss our next major milestone. Today, I'm excited to share that as we exit fiscal year 26, we expect to achieve total ARR of $1 billion, with subscription ARR representing 90% of total ARR, including an accelerating FAST contribution ranging from $310 million to $330 million. For additional details and trends on all of our key metrics, please take time to review our investor deck contained in the investor relations section of our website. Operator, you can now open the line for questions.

Speaker Change: Like to discuss our next major milestone.

Speaker Change: Today, I am excited to share that as we exit fiscal year 2006.

We expect to achieve total <unk> of $1 billion.

Speaker Change: With subscription <unk>, representing 90% of <unk>.

Speaker Change: Including an accelerating SaaS contribution.

Ranging from $310 million.

Speaker Change: $330 million.

Speaker Change: For additional details and trends on all of our key metrics. Please take time to review our investor deck contained in the Investor Relations section of our website.

Speaker Change: Operator, you can now open the line for questions.

Operator: Thank you, and as mentioned, the floor is now open for questions. A reminder to press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press the star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, that's Star 1 to join the queue, and your first question comes from the line of Aaron Rakers from Wells Fargo. Please go ahead.

Thank you and as mentioned the floor is now open for questions.

Speaker Change: A reminder to press star one on your telephone keypad to raise your hand and joined the queue.

Speaker Change: If you would like to withdraw your question press the star one again.

Speaker Change: You are called upon to ask you a question in a listing by a loud speaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking a question again Thats star one to join the queue and your first question comes from the line of Aaron Rakers from Wells Fargo. Please go ahead.

Aaron Christopher Rakers: Yeah, thanks for taking a question and congrats on the solid results. I'm curious as we think about the guidance that you've given for the full year on your ARR, particularly on the subscription side, and just the growth in subscriptions in general. How would I characterize the renewal opportunity relative to kind of the new subscription growth that you're expecting? Any kind of framework of the base of renewals relative to new would be helpful, and I do have a follow-up.

Aaron Christopher Rakers: Yes, thanks for taking the question and congrats on the solid results I am curious as we as we think about the guidance that you've given for the full year on your IRR.

Aaron Christopher Rakers: Particularly with the subscription side.

Aaron Christopher Rakers: And just the growth in subscription in general how would I characterize the renewal opportunity relative to kind of the new subscription growth that youre expecting any kind of framework of the base of renewals relative to new would be would be helpful and I do have a follow up hey.

Gary Merrill: Hey Aaron, it's Gary.

Aaron Christopher Rakers: Darrin, it's Gary good morning. Thanks, Thanks for joining us I'll start off and take your question and yes, we're really pleased and excited about the momentum that we have in the business and looking forward to accelerated revenue growth.

Gary Merrill: Good morning. Thanks for joining us. I'll start off and take your question.

Gary Merrill: And yes, we're really pleased and excited about the momentum that we have in the business and looking forward to accelerated revenue growth. That revenue growth will be driven by subscription revenue, which as you know, includes both our software and SaaS.

Aaron Christopher Rakers: Revenue growth will be driven by subscription revenue as you know that contains both our software and SaaS and SaaS and with the momentum that we see we will see a balanced contribution.

Gary Merrill: And with the momentum that we see, we will see a balanced contribution between our land and expand business and our renewal business. We will see incremental renewal tailwinds again in the fiscal year, not to the extent that we necessarily saw in fiscal year 24, okay? They will start to normalize as we get into 25 and beyond, especially since our average terms are down around about two years now. So the quantum will go up, but the percentage increase will be less than we saw in FY24. And we think that we'll see a nice strong balance between land and expansion and renewal.

Aaron Christopher Rakers: Leaned, our land and expand business and our renewal business.

We will see incremental renewal tailwind again in fiscal year not to the extent that we necessarily solve in fiscal year 'twenty four okay.

Aaron Christopher Rakers: We will start to normalize as we get into 'twenty, five and beyond especially since our term. Our average terms are down around about two years now so the <unk> will go up but the percentage increase will be less than we saw in FY 'twenty four.

Aaron Christopher Rakers: We think that we'll see a nice strong balance between land and expand and hurdles.

Gary Merrill: Yep, yep, very helpful. And then as a quick follow-up, I'm just curious, when I unpack the guidance for the full year, you know, in the prepared remarks, you talked about kind of a diminishing headwind related to the perpetual business and the mixed shift towards a subscription component or term within the customer support. However, when I look at the guidance, it looks like you're implying maybe a four or five percent decline in those combined, call it mature slash declining, you know, pieces of revenue over the last year. Is that conservative? What would we expect that to kind of flatten out? I'm just curious about just kind of how much conservatism you're baking into those pieces of the revenue guide. Yep.

Speaker Change: Yes, yes, very helpful. And then as a quick follow up I'm, just curious when I unpack the guidance for the full year.

Speaker Change: In the prepared remarks, you talked about kind of a diminishing headwind related to the perpetual business.

Speaker Change: The mix shift towards subscription component our term within the customer support.

Speaker Change: Like when I look at the guidance it looks like Youre, implying maybe a four 5% decline in those combined call. It mature slash declining new pieces of revenue over the last year.

Speaker Change: Is that conservative what would we expect that to kind of flatten out I'm. Just curious if just kind of how much conservatism you're baking into that those pieces of the revenue guide.

Gary Merrill: The tailwinds we've seen are starting to diminish. I think thinking about somewhere between a flat and low single-digit decline, Aaron, is kind of what you see and reflected in our guidance. So, I would expect that perpetual business headwind. We're now in that run rate of, you know, $12 to $15 million a quarter. I would expect that customer support line to be in the low single digits, probably hovering around roughly, say, $300 million for the full year. So, what you'll see is those tailwinds now have essentially been eliminated, and then they're more roughly flattish to slightly down. So, that's basically what we see, and that's what's implied within the guidance.

Speaker Change: Yes.

Speaker Change: The tailwind we've seen are starting to diminish I think thinking about somewhere between flat and low single digit decline Erin is kind of what you've seen reflected in our guidance. So I would expect that perpetual business headwind, we're now in that run rate.

Speaker Change: $12 million to $15 million a quarter.

Speaker Change: I would expect that customer support lines to be that low single digits, probably hovering around roughly say $300 million.

Full year, so what you'll see is those tailwind now have essentially been eliminated and then theyre more roughly flattish to slightly down. So that's basically what we see and thats whats implied within the guidance.

James Edward Fish: Your next question is from the line of James Fish from Piper Sandler. Please go ahead.

Speaker Change: Okay perfect. Thanks, Gary.

Speaker Change: Your next question is from the line of James Fish from Piper Sandler. Please go ahead.

Gary Merrill: Hey guys, thanks for the questions and a great end to the fiscal year. Congratulations. How much of the additional investments, as we're looking at margins kind of coming down, understanding there's some event stuff here that you guys have historically not participated in that you guys are getting more active in, which I'm sure your new-ish CMO is pleased about, but how much of the additional investments are more on the indirect channel side, and how should we think about the percentage of the business coming via indirect sources now?

James Edward Fish: Hey, guys. Thanks for the questions and.

James Edward Fish: Great end to the fiscal year congrats.

James Edward Fish: How much of the additional investments.

James Edward Fish: Looking at margins kind of coming down understanding there are some events stuff here that you guys have historically not participated in that you guys are getting more active in.

Which I'm sure Youre CMI.

James Edward Fish: CMO is pleased about but how much of the additional investments are more on the indirect channel side and how should we think about the percentage of the business coming via direct sources now.

Gary Merrill: Hey James, it's Gary. I'll jump in and take this one as well.

James Edward Fish: Hey, Dave It's Gary I'll jump in and take this one as well so.

Gary Merrill: So, from a margin perspective, what we've guided to is roughly, say, flattish in the guidance, and we continue to see that acceleration on the top line from SAS. So, you'll see the impact of the SAS business, our Metallic business, continue to accelerate. And that high growth propels then a slightly different margin profile, which we absorb.

Gary: From a margin perspective, what we've guided to was roughly say flattish.

Gary: In the guidance and.

Gary: We continue to see that acceleration on the top line from SaaS. So youll see the impact from the from the SaaS business, our metallic business continue to accelerate and that high growth propel.

Gary: Propelled in a slightly different margin profile.

Gary: Which we absorb.

Gary Merrill: Then when you move down to OpEx and some of the investments, a good chunk of the investments are what I called out in the prepared remarks, okay, as it relates to some of these events, especially we're excited to attend RSA just early next month. And when you move past some of that, partners and the ecosystem are a huge focus area for us during the year. Some of the work that we're doing in the ecosystem, especially with the hyperscalers, and especially tied to some of the clean room functionality and announcements that we made, should really start to propel momentum and ecosystem leverage for us as we go.

Gary: Then when you move down to Opex and some of the investments a good chunk of the investments are what I, what I called out on the prepared on the prepared remarks, okay. As it relates to some of these events, especially we're excited.

Gary: To attend RSA.

Gary: Early next early next month and when you move past some of that partners in the ecosystem is a huge focus area for us during the year. Some of the work that we're doing in the ecosystem, especially with the hyper scaler and especially tied to some of the clean room functionality and announcement that we made so really.

Gary: Start for propel momentum in ecosystem leverage for us as we go so it's not only the hyper scaler, but it's also the alliance partners that are out there as well as leveraging security partners and building the integrations with the security partner in this security partner ecosystem. So it's.

Gary Merrill: So, it's not only the hyperscalers, but it's also the Alliance partners that are out there, as well as leveraging security partners and building the integration with the security partners and the security partner ecosystem. So, it's a good call out that you have that investment and focus into the ecosystem is a big driver for us in FY25.

Gary: Good call out that you have is that that investment and focused into the ecosystem is a big driver for us in FY 'twenty.

Gary Merrill: Makes sense. Just a quick homework one.

Gary: Makes sense just a quick homework one can you guys go over any contribution from our products in fiscal 'twenty five and Sanjay for you obviously, a big merger occurred towards the end of your fiscal year.

Gary Merrill: Can you guys go over any contributions from Appranix in fiscal 25? And Sanjay, for you, obviously, a big merger occurred towards the end of your fiscal year. You know, what are you guys seeing from that combination at this point from either a customer angle or a partner angle in terms of the impacts on CommVault?

Gary: What are you guys seeing from that combination at this point.

Gary: <unk>.

Gary: Either a customer angle or a partner angle in terms of the impacts to to Commvault.

Gary Merrill: I'll start with Pranix, and then I'll turn it over to Sanjay, and he can hit some of the others. So first, as it relates to Pranix, we're actually really excited, because it gives us functionality and brings us even further into the world of cyber resiliency. It's a young company, so with not a lot of employees, probably about 25 customers.

Speaker Change: I'll take off.

Speaker Change: On the <unk>, and then I'll turn it over to Sanjay.

Sanjay Mirchandani: Some of the others. So first as it relates to predict so we're actually really excited because it gives us functionality and brings us even further into the world of cyber resiliency.

Sanjay Mirchandani: It's a young company so with not a lot of not as employees, probably about 20 525 customers. So as we start to build through that integration here pretty quickly we'll start to see contribution probably in fiscal Q2 fiscal fiscal Q3, but fundamentally what it helps us do is really bring in <unk>.

Gary Merrill: So as we start to build through that integration here pretty quickly, we'll start to see contribution probably in fiscal Q2, or fiscal Q3. But fundamentally, what it helps us do is really bring in the rebuild into the CommVault cloud. It's a major competitive differentiation for us because as a customer rebuilds from a ransomware attack, going from recovering your data to rebuilding and recovering your applications is a game changer, we think, in this environment. Okay, maybe I'll just turn it over to you for the second part. Yeah, for the merger that I think you're alluding to, you know, it's

Sanjay Mirchandani: He built into the Commvault cloud is a major competitive differentiation for us because as a customer rebuilds from a ransomware attack going from recovering your data to rebuilding and recovering your applications is a game changer, we think in this environment.

Speaker Change: Okay, maybe I'll just turn it over to you for this second part yes.

Speaker Change: The merger that I think you are alluding to.

Sanjay Mirchandani: When the date was announced, we got calls from prospects who are existing incumbents for them asking us to sort of help them understand it and what the optionality was. Since then, we've converted several of those incumbent customers of the competitors over onto our platform, and there are many more in the pipeline. In fact, partners.

Speaker Change: The date was announced we got calls from prospects who are existing incumbents.

Speaker Change: For them and asking us to sort of help them understand it and what the Optionality was since then we've converted several of those.

Speaker Change: Incumbent customers or the competitors over onto onto our platform and there are many more in the pipeline in fact partners.

Sanjay Mirchandani: Partners feel alienated by this and have come to us asking us to sort of figure out new ways to work with them and with their customers. Tomorrow, you're going to see a campaign that's going to be quite, I'm going to say, good for customers, between us and a partner, really helping them move away from the competitor. So it's all good for us. We see it as an opportunity. There's a lot of uncertainty, and uncertainty doesn't make customers safer. And so we're going in with CommVault Cloud and really helping customers see a safer future.

Speaker Change: Gartner is feel alienated on this and have come to us asking us to sort of figure out new ways to work with them into what.

Speaker Change: Their customers Tomorrow, we're going to you're going to see.

Speaker Change: A campaign, that's going to be quite.

Speaker Change: I'm going to say good for customers.

Speaker Change: And our partner really helping them move away from.

Speaker Change: From the competitor so it's all good for US we see it as an opportunity there's a lot of uncertainty and uncertainty doesn't make customers safely.

Speaker Change: And so we're going in with Commvault cloud and really helping customers see a safer future.

Howard Ma: Your next question comes from the line of Howard Ma from Guggenheim Securities. Please go ahead.

Speaker Change: Thanks, guys.

Speaker Change: Your next question comes from the line of Howard MA from Guggenheim Securities. Please go ahead.

Howard Ma: Great, thanks. Sanjay, can you talk about CommVault Cloud, how the portfolio, and demand drivers and how that will continue to evolve as you march towards your fiscal 26 targets that you laid out today? In particular, some of your peers in the space seem to prefer a cloud-first approach. You can compare that with CommVault's strategy of giving customers more flexibility in terms of where they choose to protect their workloads, whether it's on-premises or in the cloud. Can you just talk about how important this hybrid approach is to achieving your long-term targets? Thanks.

Howard Ma: Great. Thanks.

Howard Ma: Sanjay can you talk about how commvault cloud how the portfolio can you talk about the portfolio and demand drivers in housing and how that will continue to evolve as you March towards you.

Howard Ma: Your fiscal 'twenty six targets that you laid out today in particular some of your peers in the space deemed it to prefer a cloud first approach and you compare that with Commvault strategy of giving customers more flexibility in terms of.

Howard Ma: Where they choose to protect their workloads, whether it's on Prem or cloud can you just talk about how important is this hybrid approach to achieving your long term target. Thanks, Greg.

Sanjay Mirchandani: Good to hear from you, Howard. So the way we're looking at the next eight quarters and beyond is about the customer and putting customer safety first. Our entire capability of the company, which was originally data protection, has pivoted and been enhanced around CommVault Cloud for cyber resilience, and at the heart of cyber resilience is a customer's ability to recover in the face of an attack.

Speaker Change: Great good.

Greg: Good to hear from you Howard.

Greg: So.

Speaker Change: The way we're looking at the next eight quarters and beyond is about the customer and putting the customer safety first our entire capability of the company, which was originally data protection has pivoted and been enhanced ground Commvault cloud cyber resilience and at the heart of cyber resilience is our customers.

Speaker Change: The ability to recover in the face of an attack. So we continue to flesh out our capabilities and we don't separate out artificially like some of our competitors do.

Sanjay Mirchandani: So we continue to flesh out our capabilities, and we don't separate out artificially, like some of our competitors do, on-premise workloads from cloud workloads because, eventually, in the hybrid world, workloads will move, and they will live in different places at different times and in different clouds. We take that to heart, and everything we do is with a hybrid cloud capability. So SaaS workloads, on-premise workloads, the broadest breadth of workloads that a customer could ever think of, we will cover.

Speaker Change: On premise workloads from cloud workloads, because eventually in the hybrid world workloads will move and they will live in different places at different times and in different clouds, we take that to heart and everything we do is with a hybrid.

Speaker Change: Capabilities, so SaaS workloads on premise workloads, the broadest breadth of workload that a customer could ever think of we will cover that.

Sanjay Mirchandani: Then if you look at the architecture that we have, it decouples storage from the control plane, and that gives customers that additional capability of being able to run anywhere and write. That is what matters, and that gives them more insularity. It makes their architecture more insular and more secure, and the amount of innovation we're putting into our CommVault cloud platform. All of this will keep us in good stead as we move forward.

Speaker Change: If you look at the architecture that we have a decoupled storage.

Speaker Change: Well from a control plane and that gives customers that additional capability of being able to run anywhere and right back to work.

Speaker Change: That is what matters and that gives them more intellectually.

Speaker Change: It makes their their architecture more insular and more secure so between the architecture.

Speaker Change: The amount of innovation reporting into the amount of innovation, we are putting into our commvault cloud platform. All of this will keep us in good stead as we move forward.

Sanjay Mirchandani: The question about cloud first versus not is, everything we do is cloud. We've moved over four exabytes of data conservatively in the last couple of years into the public cloud. Okay, our ability to do things in the cloud is second to none because we use native capabilities. We don't stage, and we don't move things into an appliance before we move them to the cloud, like some of our competitors do. So we're very confident in the architecture; we're very confident that everything we do ends up somehow in the cloud.

Speaker Change: <unk>.

Speaker Change: The question about cloud first versus not everything we do as we've moved over for extra bytes of data conservatively. The last couple of years into the public cloud.

Speaker Change: Okay, our ability to do things in the cloud are second to none because we use native capabilities, we don't stage and we don't move things into an appliance before we move into the cloud like some of our competitors do so we're very confident on the architecture. We're very confident that everything we do ends up somehow in the cloud architecture was rebuilt <unk>.

Sanjay Mirchandani: Our architecture was rebuilt through Metallic in CommVault Cloud in the last couple of years to be totally cloud native. And with the acquisition of Opranix, we take cloud native to the next level with application-level rebuild, which makes our resilience portfolio even richer. So, probably more than you wanted, Howard, but you see why we're so excited about where we're going with this.

Speaker Change: In Commvault acquired in the last couple of years can be totally cloud data and with the acquisition of our products.

Speaker Change: Cloud made it to the next level with application level rebuild which makes our resilient portfolio, even richer so probably more than you wanted powered but when you see why we're so excited about about where they're going with us.

Howard Ma: Thanks, Sanjay. I mean, I think we always want more. That's our problem.

Speaker Change: Yes.

Speaker Change: Thanks Sanjay.

Speaker Change: We always want more.

Sanjay Mirchandani: Can you talk a little bit more about the Apranix acquisition you just mentioned? It seems like the ability to rebuild cloud applications and configurations is pretty unique. Will Apranix be used, I guess, can it be used with the most commonly used third-party SaaS applications, you know, like, I guess, Salesforce is, you know, ServiceNow, Workday is the world, or is it more for custom apps, or is it both? And will this be a standalone SKU or just integrated into the platform? So it's the latter. It's

Speaker Change: It's a problem.

Speaker Change: Can you talk a little bit more about the <unk> acquisition, you just mentioned it seems like the ability to rebuild cloud applications and configurations seems pretty unique.

Speaker Change: It will be used I guess can it be used more.

Speaker Change: The most commonly used third party SaaS applications like Salesforce service now workdays of the world or is it even more for custom maps, whereas at Boston.

Speaker Change: Be a standalone SKU or just integrated into the platform.

Speaker Change: So it's the latter.

Sanjay Mirchandani: So, it's the latter. The complexity comes in. So, our core SaaS Metallic platform covers a lot of the ready-made, if you would, SaaS apps out there, right? So, we know how to do those, whether it's the offices of the world or Dynamics or whatever. So, that goes through a more standard ability for us to protect. With cloud-native apps, as customers migrate more and more of their apps into the cloud, managing those apps and giving them the level of resiliency and ransomware protection that we can give more traditional apps gets harder.

Speaker Change: The complexity comes it so of course, our core SaaS metallic platform covers a lot of these were already made if you would SaaS apps out there right. So we know how to do those but at the offices of the world or dynamics or what have you. So that that goes through a more standard ability for us to protect.

Speaker Change: With cloud native apps.

Speaker Change: Summers migrate more and more of the app into the cloud managing those apps and given them a level of resiliency and ramp up of protection that we could give more traditional apps gets harder and they use native cloud native cloud native capabilities as they move their workloads into the cloud what <unk> does is.

Sanjay Mirchandani: And they use cloud-native capabilities as they move the workloads into the cloud. What Kranix does is discovers all of those assets that they have that make up an app, tells you very clearly what is and isn't protected, and brings them into the fold with a very automated process. And then, whether you're doing it for practice or you're doing it for real, allows you to rebuild that application step-by-step very quickly. It's, you know, cloud-native apps can be, tend to be less persistent and less coupled, if you will, than traditional apps.

Speaker Change: He has discovered all of those assets that they have that makeup in App tells you very clearly what is and isn't protected.

Speaker Change: He is identical followed with an armed with a very automated process and then whether youre doing it for practice when youre doing it for real allows you to rebuild that application step by step very quickly.

Speaker Change: Cloud native apps can be.

Speaker Change: We tend to be less persistent and less couple if you will than traditional apps.

Sanjay Mirchandani: Now, where the rubber really hits the road, Howard, in our experience, and we've done this many, many times, when a customer is breached and is trying to recover from an attack, about a third of the time, roughly, plus minus, is spent bringing back the data.

Speaker Change: <unk>.

Speaker Change: Where the rubber really hits the road Howard is in our experience and we've done. This many many times when a customer has breached and this space is trying to recover from an attack about a third of the time roughly plus or minus is on bringing back that data and once they've got good clean validated data from us they spend roughly two thirds.

Sanjay Mirchandani: And once they've got good, clean, validated data from us, they spend roughly two-thirds of the time, beyond that, bringing back apps and verifying apps. And now, with this capability, with the Frantics, we hopefully can give them an end-to-end solution on the platform with resilience and the ability to bring back their apps very quickly. Now, the way it's going to be delivered to market through the summer, it's going to be as it is and available. You know, it has basically two SKUs today. You can either take a basic SKU, or you can take an enterprise-grade SKU and roll it out. It's very easy.

Speaker Change: At the time beyond that bringing back apps and verifying apps and now with this capability with a chronic we hopefully can give them an end to end solution on the platform with resilience.

Speaker Change: They bring back their apps.

Speaker Change: Very quick.

Speaker Change: Now the way, it's going to be delivered to market.

Speaker Change: Through the summer is going to be.

Speaker Change: As it is and available.

Speaker Change: Basically two skus today, you can either take a basic SKU, where you could take an enterprise grade skewing and roll. It out is very simple itself discovers that runs the deals.

Sanjay Mirchandani: It self-discovers. It runs. And over the course of the summer, we're going to bring more of the CommVault magic into it and enhance more of the capabilities. We've got a very rich roadmap in front of us. I'm not going to talk about it right now, but rest assured that lifecycle management and policy applications around broad data sets when you're trying to rebuild apps will definitely make their way into the product.

Speaker Change: And over the course pass the software, we're going to bring more of the.

Speaker Change: The Commvault magic Intuit and enhanced more of the capabilities. We've got a very rich roadmap in front of us I'm going to talk about it right now, but rest assured that lifecycle management and policy applications around broad datasets when youre trying to rebuild apps, we'll definitely make its way into the product.

Speaker Change: Great. Thanks, so much.

Speaker Change: Welcome.

Eric Martinuzzi: Your next question comes from the line of Eric Martinuzzi from Lake Street. Please go ahead.

Speaker Change: Question comes from the line of Eric <unk> from Lake Street. Please go ahead.

Gary Merrill: Yeah, I wanted to better understand the outperformance in your Q4. It sounds like, you know, just basically versus what you're expecting for Q4, we had a little bit better performance or maybe execution on the term agreement side of the subscription. Could you narrow that down, maybe by geography or vertical?

Eric: Yes, I wanted to better understand the outperformance in your Q4.

Eric: It sounds like just basically versus what you're expecting for Q4, we had a little bit better performance or maybe execution.

Eric: The term agreement side of the subscription, but could you narrow that down maybe by geography or vertical points to call out there.

Gary Merrill: Any points to call out there?

Gary Merrill: Hey Eric, it's Gary. I'd like to talk to you this morning about Q4, and as you mentioned, we're really pleased. It was an amazing quarter for us, and it capped off a really strong year, okay? And we saw immediate benefits from some of the cyber resiliency offerings that we announced. Going back to our shift event that we had just past November, we announced a kind of platform approach with a few different tiers and expected some of the benefits of our new cyber resiliency packaging, pricing, and functionality. We saw immediate benefits in the quarter.

Speaker Change: Hey, Eric It's Gary I'd like to talk to you. This morning is related to Q4 and as you mentioned, we're really pleased.

Gary: It is an amazing quarter for us capped off a really strong year, okay, and we saw immediate benefit from some of the cyber resiliency offerings that we announced going back to our shift event that we had this past November we announced that our platform approach with a few different tiers and expecting that some.

Gary: Some of the benefit from our new cyber resiliency packaging pricing and functionality and we saw immediate benefit in the quarter. So very pleased with how quickly our customers are adopting that functionality and what it's doing to help drive us predictability and momentum in the business. If you tie that with better execution in the field.

Gary Merrill: So very pleased with how quickly our customers are adopting that functionality and what it's doing to help drive predictability and momentum in the business. If you tie that with better execution in the field, and execution means close rates and ability to deliver against numbers and close against a qualified pipeline, it ends up in a very strong quarter. From a geographic perspective, we saw performance across both of our regions, both in our Americas region as well as in our European region. And if I had to call out one thing in particular, the penetration we saw in the Americas on new customers was one of the strongest quarters we've had in quite some time. Okay.

Gary: And execution being close rates and ability to deliver against numbers and enclose against a qualified pipeline.

Gary: Ends up in a very strong quarter from a geographic perspective, we saw performance across both of our regions, both our Americas region as well as our European region, and if I had to call out one thing in specific the penetration that we saw in the Americas on new customer was one of the strongest quarters, we've had in quite some time.

Speaker Change: Okay, and then taking that Q4 outperformance and then just looking out at your 2025 outlook.

Gary Merrill: Okay, and then taking that Q4 outperformance and then just looking out at your 2025 outlook, the pipeline, I hesitate to kind of boil it down into a world of DR versus cyber resiliency, but what are you seeing in the pipeline as far as maybe cyber resiliency as a percent of mix?

Speaker Change: Pipeline.

Speaker Change: Yes.

Speaker Change: I hesitate to kind of boil it down into a world.

Speaker Change: Dr versus cyber resiliency, but what are you seeing in the pipeline as far as maybe cyber resiliency as a percent of mix.

Sanjay Mirchandani: Eric, this is Sanjay. It's, it's, you know, I don't think we're at this point releasing the mix chip, but the way I like to characterize it is It's a journey for a customer in really three stages. Fundamental protection of their assets, their data assets, and even application assets. Moving that to a highly automated DR capability and scale capability to be able to, it's not just about bringing back your workloads; it's about bringing them back, verified, and scaled.

Speaker Change: It is.

Speaker Change: <unk>.

Sanjay Mirchandani: Eric This is sanjay.

Sanjay Mirchandani: I don't think we are at this point, releasing the mixed shift, but the way I like to characterize it.

Sanjay Mirchandani: Yes.

Speaker Change: It's a journey.

Sanjay Mirchandani: Customer.

Sanjay Mirchandani: Three stages fundamental protection.

Sanjay Mirchandani: After their assets the data assets and even application assets.

Sanjay Mirchandani: Moving back to a highly automated Dr capability and scale capable to be able to it's not just about bringing back your workloads is about bringing them back verify that scale. So you need a ton of automation AI capabilities, and then extending that all the way to the ultimate sort of capability, which is recovering from a cyber resilience.

Sanjay Mirchandani: So you need a ton of automation AI-type capability and then extending that all the way to the ultimate sort of capability, which is recovering from cyber resilience. You're really building in cyber resilience and having foolproof recovery. Now, that also means that you connect back in on the perimeter with partners on the defense side.

Sanjay Mirchandani: We are really building and cyber resilience of having foolproof recovery now that also means that you connect backend on the perimeter with partners on the defense side of things.

Sanjay Mirchandani: So it's a deep integration of security capabilities, AI capabilities, and automation. And obviously, our core, which is about our ability to bring back customers to life through protection. So it's, you know, I, you know, it's early for us in a skew or product-based delivery model. But needless to mention, every customer we speak to wants to be on the right-hand side of that capability, which is cyber-resilient. So our goal with our partners is to move them through that journey just as fast as they're capable of absorbing what it takes.

Sanjay Mirchandani: And so it's a deep integration of security capabilities.

Sanjay Mirchandani: Capabilities and automation and obviously, our core which is about our ability to bring back customers to life.

Sanjay Mirchandani: Through protection so.

Speaker Change: It's early for us.

Speaker Change: <unk>.

Speaker Change: And our SKU are product based delivery model, but needless dimension every customer we speak to wants to be on the right hand side of that of that capability with the cyber resilience. So our goal with our partners is to move them through that journey, just as fast as they are capable of absorbing what it takes.

Eric Martinuzzi: understand. Thank you.

Speaker Change: Understand thank you.

Jason Noah Ader: Your next question comes from the line of Jason Ader from William Blair. Please go ahead.

Speaker Change: Your next question comes from the line of Jason Ader from William Blair. Please go ahead.

Jason Noah Ader: Thank you. Good morning, guys.

Jason Noah Ader: Yeah. Thank you good morning, guys.

Gary Merrill: Two quick questions. One is, do you expect Term to grow double digits in FY25? And then the second question is, just on the data security slash cyber resilience branding, and I know you guys have pushed this concept as well as Rubrik and others. Are you starting to see more of your technology being sold into the CISO budget versus the CIO budget? Is the branding aligning with the reality of how customers are actually budgeting for your technology?

Jason Noah Ader: Two quick questions one is.

Jason Noah Ader: Do you expect.

Jason Noah Ader: Term to grow double digits in FY 'twenty five.

Jason Noah Ader: And then the second question is.

Jason Noah Ader: Just on the data security slash cyber resilience branding and I know you guys have pushed this concept as well as rubric.

Jason Noah Ader: And others are you starting to see more of your technology being sold into the <unk> budget versus the CIO budget in other words.

Jason Noah Ader: Is the branding.

Jason Noah Ader: Aligning with the reality of how customers are actually budgeting for your technology.

Sanjay Mirchandani: Yeah. Hey, Jason. It's Gary.

Gary Merrill: I'll get the first one, and then I'll pass it to Sanjay to talk about your second part. As it relates to contribution in FY25, we've now built a very repeatable business model with a recurring revenue function. And so with that, we'll get contribution from – within that subscription line, we will get strong contribution from all three sources. Those three sources would be our terminal business, our land expand business on the terminals, and the highest level of acceleration will be tied to our SAS business.

Jason Noah Ader: Yeah, Hey, Jason It's Gerry I'll take the first one in El Paso for Sanjay to talk about Europe. Your second part as it relates to contribution in FY 'twenty five.

Jason Noah Ader: We've built now a very repeatable business model with recurring revenue function and so with that we will get contribution from within that subscription line. We will get strong contribution from all three sources those sources would be our term renewal business our land expand.

Jason Noah Ader: Business on the terminals.

Speaker Change: The highest level of acceleration will be tied to our SaaS business youll be able to model. It if you're just kind of take a look at our staff. There are where we ended the year youll get a pretty good sense for what our SaaS contribution will be which will be very strong again, but it will be complemented with with good growth from the term software licenses as well and so I'll just pass.

Gary Merrill: You'll be able to model it if you just kind of take a look at our SAS ARR, where we ended the year. You'll get a pretty good sense for what our SAS contribution would be, which would be very strong again, but it will be complemented with good growth from term software licenses as well. And Sanjay, I'll pass it to you on the second part. Thanks.

Speaker Change: With you on the second part Thanks, Hi, Jason.

Sanjay Mirchandani: So, the short answer is yes, absolutely. CISOs. We have met more CISOs in the last six, seven months than in the prior two years, only because the requirements have increased. And it's not just about perimeter security; it is about recovery. And recovery traditionally has lived with IT.

Speaker Change: The short answer is yes, absolutely <unk>.

Speaker Change: But more so in the last six seven months than probably the prior two years only because the requirements have increased and it's not just about perimeter security. It is about recovery and recovery traditionally has lived with it.

Sanjay Mirchandani: So our CommVault cloud platform bridges, and we think we're very unique in what we do, the needs of a classic CISO organization's responsibilities with a classic IT infrastructure organization's responsibilities and data protection. We bridge the two. We also bridge SAS and non-SAS, which is very important to customers because you can't have separate policies and separate capabilities. You need more unification. We also integrate with the perimeter, with the likes of Palo Alto and Dark Trace.

Speaker Change: Our Commvault cloud platform bridges that we think are very unique in what we do the need of a classic <unk> organization's responsibilities with the classic it infrastructure organizations responsible use of data protection. We bridge. The two we also break SaaS and non SaaS, which is very important to customers because you can't have separate policies and separate capabilities.

Speaker Change: You need more unification, we also integrate with the perimeter.

Speaker Change: With a lifestyle Palo alto with the likes of dark trades, we integrate with their capabilities. So that their intelligence is fed into our capabilities of our intelligence is fed back into theirs. So it is a unifying platform for both the security organization and the it infrastructure organization and most companies and that is very appealing.

Sanjay Mirchandani: You know, we integrate with their capabilities so that their intelligence is fed into our capabilities, and our intelligence is fed back into theirs. So it is a unifying platform for both the security organization and the IT infrastructure organization in most companies. And that is very appealing. So it's not a pivot on one side or the other. Recovery is a team sport when you get hit, and time is of the essence. We believe we're the only platform with the capabilities to do that, to get customers back up with the lowest.

Speaker Change: It's not a pivot on one side or the other recovery is 18 support when you get hit and time is of essence, we believe we're the only platform with the capabilities to get that to get customers back up into the low CTO.

Jason Noah Ader: And then just a quick follow-up to you, Sanjay; do you foresee the industry starting to see consolidation between, you know, kind of your line of business, this, you know, backup and recovery and cyber resilience with more traditional security companies, sort of a la the Symantec, Veritas, you know, decade-ago concept?

Speaker Change: And then just a quick follow up to Sanjay do you do you foresee the industry starting to see consolidation.

Speaker Change: Between kind of your line of business.

Speaker Change: Backup and recovery in <unk>.

Speaker Change: Cyber resilience with more traditional security companies, who serve our.

Speaker Change: The Symantec Veritas decade ago concept.

Sanjay Mirchandani: I don't I don't think I understand your question fully. Are you talking about perimeter security consolidation? Are we talking about legacy?

Sanjay Mirchandani: I don't I don't think I'm. Following your question for you you talked about perimeter security consolidation are we talking about legacy.

Sanjay Mirchandani: convergence between security vendors and traditional backup vendors. Yeah. So, you know, there is no resilience without a core...

Speaker Change: Backup.

Speaker Change: Convergence between <unk>.

Speaker Change: Security vendors and traditional backup vendors yes.

Speaker Change: There is no resilience without core security so over the years, we have built.

Sanjay Mirchandani: What we've also done, which I think is unique to us, is we're not competing with the traditional security players. We're integrating with the traditional security players, because that is their forte. But recovery is a team sport, like I said earlier, and you need to have the intelligence to make sure that the data that you're restoring and recovering is actually... clean is actually the way you want it. And so for that, having threat intelligence, having risk assessments, having all of that integrated into our capabilities with partnerships and some of it on our own makes the platform more robust than anybody else.

Speaker Change: All of the required zero Trust type architectures, plus plus plus into our technology to make the data that we protect more secure and more verifiable on recovery.

Speaker Change: We've also done which I think is unique to us.

Speaker Change: Yes.

Speaker Change: We're not competing with the traditional security players, we're integrated with the traditional security players because that is therefore.

Speaker Change: Recovery is 18 sport so like I said earlier and you need to have the intelligence to make sure that the data that shows that the restoring of recovery is actually.

Speaker Change: Fleet is actually the way you want it and so for that pattern to threat intelligence, having the risk assessments, having all of that integrated into our capabilities partnerships and some of it our own.

Sanjay Mirchandani: And we know what we're really good at, and we protect customers' data in a difficult world. We've said that for many years, and we continue to put that at the heart of what we do. That doesn't mean we don't partner. As a reminder, before we continue on to the next question, if you would like to join the queue, please press star 1. And your next question is from the line of Rudy Kessinger from D.A.

Speaker Change: It makes the platform more robust than anybody else and we know what we're really good at and we're going to we protect customers' data in a difficult world. We said that for many years and we continue to put that at the heart of what we do that doesn't mean, we don't partner.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: As a reminder, before we continue on to the next question. If you would like to join the queue. Please press star one.

Speaker Change: Your next question is from the line of Rudy Kissinger from D. A Davidson. Please go ahead.

Operator: As a reminder, before we continue on to the next question, if you would like to join the queue, please press star 1. And your next question is from the line of Rudy Kessinger from D.A. Davidson. Please go ahead.

Rudy Kessinger: Hey, guys. Thanks for taking my questions and congrats on the strong numbers here.

Rudy Kessinger: I know, it's still early with cyber resilience, but could you talk about maybe the expected ASP.

Gary Merrill: Hey, Rudy, it's Gary. Good morning, and thanks for joining us this morning. As Sanjay mentioned, it's still early for us, so we're not right at the point where we're going to start giving maybe specific contributions and uplifts. I will say, though, that during the quarter, we already saw contributions, so our results reflect those contributions as well, and some of our results relative to expectations are related to that contribution. We're building a pipeline, and that's the key point, and it's more about building that pipeline and taking our customers through that journey from where they are today to ultimate cyber resilience.

Rudy Kessinger: ASP uplift.

Rudy Kessinger: That you expect in some of these deals.

Rudy Kessinger: When this year should we maybe start to see some material contribution from a new business standpoint from cyber resilience.

Speaker Change: Yes, everybody.

Rudy Kessinger: Terry Good morning, and thanks for joining us this morning.

Terry: As Sanjay mentioned, it's still early for us. So we're not right at the point, where we're going to start, giving maybe specific contribution and uplifts.

Terry: I will say, though that during the quarter, we already saw cost position. So our results reflect contribution as well and some of our.

Terry: Results relative to expectations are related to that to that contribution we're building pipeline and thats. The key point and it's more about building the pipeline and built and taking our customers through that journey from where they are today to ultimate cyber resilience. So it's not just you go from here to there it's a journey.

Gary Merrill: So it's not just you go from here to there. It's a journey, and we can do that in multiple ways. They can build that over time. We have other bundling and packaging options that they can go straight to, and with some of the functionality we released with clean room technology today, we're giving them the opportunity to build that on through that journey.

Rudy Kessinger: And we can do that multiple ways. They can build that over time, we have other bundling and packaging options that they can go straight there and with some of the functionality, we released with like clean room technology today, right, we're giving them the opportunity to build that on through through that journey, but maybe sandro Patti.

Sanjay Mirchandani: But maybe, Sanjay, I'll pass it to you. Yeah, no, I'll just give you an observation, a data point.

Sanjay Mirchandani: I'll just give you an observation, a data point. Customers that have been breached completely gravitate towards the type of resilience and Capability because they know what it takes to recover. And it is hard. So our cyber resilience capabilities in the platform, SaaS and non-SaaS, are very appealing. Like Gary said, we've already seen some success. The pipeline is building. And all the conversations we're having with customers gravitate towards how fast we can get to be really resilient.

Speaker Change: I'll just give you an observation of data point.

Rudy Kessinger: Customers that have been breached.

Rudy Kessinger: Completely gravitate towards the cyber resilient message and capabilities because they know what it takes to recover and it is it is hard so are our cyber resilience capabilities in the platform SaaS and non SaaS are very appealing with like Gary said, we've already seen some success the pipeline is building and all the.

Rudy Kessinger: Conversations, we're having with customers.

Rudy Kessinger: Gravitate towards how fast can we get to be really resilient and that comes with <unk>.

Sanjay Mirchandani: And that comes with two things, an incredible ability to recover, which we bring to the table, and with our unique innovation in Cleanroom, it's our capability, as Gary mentioned, your ability to test your readiness as often as you want across all workloads, so that you are truly ready for that attack if it happens. So, you know, again, it's not, yes, the packaging is newish, but the desire and customers and understanding of where they need to be aren't, and especially when they've been.

Rudy Kessinger: Two things are an incredible ability to recover which we bring to the table and with our unique innovation on clean room, It's our capability as Gary mentioned, you believe attached to your readiness.

Rudy Kessinger: Often as you want across all workloads. So that you are truly ready for that that attack if it happens so again.

Rudy Kessinger: <unk>.

Rudy Kessinger: It is not yet the packaging is newish, but the desire and customers and understanding of where they need to be.

Rudy Kessinger: And especially when they have been reached.

Operator: And that concludes today's Q&A session. I would like to turn the conference back over to Mike for his closing remarks.

Rudy Kessinger: Okay.

Rudy Kessinger: And that concludes today's Q&A session I would like to turn the conference back over to Mike for closing remarks.

Michael John Melnyk: Thanks, Paulie. For those of you who will be out at RSA in San Francisco, we're going to have an exciting booth with exhibits, and we'll have our executive management team present, as well as a number of our field personnel. So we hope you can join us at RSA next week. As a reminder, a recap of the call, we have a presentation posted on our Investor Relations website, and you can reach out to me with any questions. Thanks for joining us today, and we look forward to speaking with you soon.

Rudy Kessinger: Okay.

Mike: Thanks, Paul.

Mike: For those of you who will be out at RSA in San Francisco, we're going to have an exciting booths with exhibits and we will have our executive management team present as well as a number of our field personnel. So we hope you can join us at RSA next week.

Mike: Reminder, a recap of the call we have a presentation posted on our Investor Relations website and you can reach out to me with any questions. Thanks for joining today and we look forward to speaking with you soon thank you.

Operator: This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.

Speaker Change: This concludes today's conference call enjoy the rest of your day you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.