Q1 2026 Commvault Systems Inc Earnings Call
Desiree: standing by. My name is Desiree and I will be your conference operator today.
Desiree: At this time, I would like to welcome everyone to the CommVault First Quarter Fiscal Year 2026 Earnings Conference. All lines have been placed on mute to prevent any background noise. 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 star followed by the number 1 on your telephone key. If you would like to withdraw your question again, press the star 1.
Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator. Today, at this time, I would like to welcome everyone to the Commvault first quarter fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise.
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 star followed by the number 1 on your telephone keypad.
Mike Melnyk: I would now like to turn the conference over to Mike Melnyk, Head of Investor Relations. You may begin.
If you would like to return your question again, press star 1.
I would now like to turn the conference over to Mike Melnick, head of investor relations. You may begin
Mike Melnyk: Good morning and welcome to our earnings conference. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about CommVault's future expectations, plans, and processes. All such forward-looking statements are subject to risks, uncertainties, and assumptions.
Good morning, and welcome to our earnings conference call.
Mike Melnyk: Please refer to the cautionary language in today's earnings release and CommVault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. CommVault does not assume any obligation to update these statements.
Mike Melnyk: During this call, CommVault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website.
Sanjay Mirchandani: Thank you again for joining us and now I'll turn it over to our CEO Sanjay Mirchandani for his opening remarks. Good morning, and thank you for joining today's call. CommVault had a tremendous start to our Some highlights from the quarter in Total ARR grew 24% to 996 million. Subscription ARR growth 33% to 844 Total revenue grew 26% to $282 million. Subscription revenue increased 46% to 182 million and we achieved 47 on a rule of 40 basis. Our execution has never been better across the We continue to see hyper grow with our fast lap. SAS ARR soared 63% to 307 million, and in Q1, we surpassed 8,000 customers.
Before we begin, I'd like to remind you that statements made on today's call will include statements about Commvault's future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and call, as well as our most recent periodic reports filed with the SEC for discussion of the risks and uncertainties that could cause the company's actual results to differ materially from those contemplated in any forward-looking statements. Commvault does not assume any obligation to update these statements during this call. Commvault's financial results are presented on a non-GAAP basis. The reconciliation between the non-GAAP and GAAP measures can be found on our website.
Thank you again for joining us now. I'll turn it over to our CEO, Sean's a merchandise for his opening remarks on J.
Good morning and thank you for joining today's call.
Convalt had a tremendous start to our fiscal year. Some highlights in the quarter include
Total ARR grew 24% to 996 million.
Subscription, ARR grows 33%.
To 844 million.
Total revenue grew 26% to $282 million.
Subscription revenue increased 46% to $182 million, and we see 47 on the Rule of 40 basis.
Our execution has never been better across the business.
We continue to see hyper growth with our staff platform.
Sanjay Mirchandani: and Reset to surpass our 330 million ARR target well ahead of schedule. Those stats also speak to our overall land and expan- In fact, in Q1, across software and SaaS, we had our best land and expand quarter ever. A few notable wins include Honeywell, Equifax, U-Haul, NTT Data Services, and insurance group Chaucer Law. Additionally, we've seen tremendous success in emerging routes to market. including Cloud Marketplace. During the quarter, we achieved triple-digit growth in marketplace transactions with multiple six-figure and seven-figure deals. And lastly, in terms of execution, we posted healthy growth across geographies, industries and customer segments from enterprise to Jen will share more details about this later.
Staff supports 63% to 307 million. And in q1. We surpassed 8,000 customers.
and we're set to surpass our 330 million, our targets, well ahead of schedule,
Those stats also speak to our overall land and expenses. In fact, in Q1 across software and SaaS, we had our best land and expand quarter ever.
An insurance group chiao.
Additionally, we've seen tremendous success in emerging routes to market, including cloud marketplaces.
During the quarter, we achieved triple digit growth in Marketplace transactions with multiple 6-figure and zag 7-figure deals.
And lastly, in terms of execution, we posted Healthy Growth across geographies Industries and customer segments from Enterprise to SMB.
Sanjay Mirchandani: None of this would have been possible without the trust of our customers and partners and the hard work and dedication of our team members globally.
General share more details about this later.
Sanjay Mirchandani: Thank you.
None of this would have been possible without the trust of our customers and partners, and the hard work and dedication of our team members globally. Thank you all.
Sanjay Mirchandani: The strength we demonstrated in Q1 provides us with a solid foundation for the rest of the fiscal year. As we reported in previous quarters, there are three critical drivers that continue to underpin our long-term sustainable growth. First, the cyber resilience market As CIOs and CECOs alike strive to keep their businesses operating continuously in a world of relentless threat and attack. CommVault is front and center in this market and we continue to see healthy growth in our engagement with CISO. CommVault's offerings uniquely fill the preparedness gap that security and IT teams are so concerned about. CISOs can enhance resilience by proactively assessing risks, scenario planning, and running simulations as part of our That's what we do.
The strength, we demonstrated in q1 provides us with a solid foundation for the rest of the fiscal year.
As we reported in previous quarters, there are three critical drivers that continue to underpin us: this long-term sustainable growth.
First, the Cyber resilience Market is booming.
As cios and CEOs alike strive to keep their businesses offering continuously in a world of Relentless threats and attacks.
combat is front and center in this market and we continue to see Healthy Growth in our engagement with Co
Combos, offerings, uniquely fill the preparedness, Gap. The security and it teams are so concerned about today,
CEOs can enhance resilience by proactively accepting risks, scenario planning, and running simulations as part of our platform.
Sanjay Mirchandani: And we do it better than anyone else. We continue to see growth with our clean room recovery offering that enables customers to test their resiliency in good times so they're prepared for the hard times. In Q1, a government institution in the Middle East chose CommVault Cloud and Cleanroom Recovery to regularly test their cyber preparedness. The customer also added AirGaP Protect, Active Directory and Cloud Rewind for enhanced security and rapid recovery following an outage of cyber attacks. This quarter, we brought cyber preparedness to a new level with the introduction of recovery. This hands-on in-person experience enables security and IT teams to simulate the pressure of real-world attacks in a setting that models their own production environment.
That's what we do and we do it better than anyone else.
Case in point.
We continue to see growth with our clean room recovery offering that enables customers to test their resiliency in good times, so they prepare for the hard times.
In q1 a government institution in the Middle East shows, common cloud and clean and Recovery to regularly test. Their cyber preparedness.
The customer also added an air gap to protect Active Directory, as well as Cloud Recovery for enhanced security and rapid recovery following an outage or cyber attack.
This quarter, we brought cyber preparedness to a new level with the introduction of recovery range.
Sanjay Mirchandani: Unlike other simulations, defenders can practice their responses, recovery, and put their preparedness skills to the test. Our second critical market driver is the breadth of our partner. Q1 was a phenomenal quarter for CommVault in terms of extending our reach of partners. In addition to doubling down on cloud marketplaces, we announced major partnerships across We formed a strategic alliance with Deloitte to help end crisis around the world, fortify the defenses, and swiftly recover from outages and cyber attacks. We took our partnership with CrowdStrike to the next level, announcing an expanded collaboration that brings together their elite incident response services with our industry-leading recovery These services help customers improve readiness, respond faster, and achieve cleaner recovery.
This hands-on, in-person experience, enables security, and it teams to simulate the pressure of real world attacks in a setting that models their own production environment.
And like, other simulations Defenders can practice their responses recovery and put their preparedness skills to the test.
Our second critical market driver is the breadth of our partner ecosystem.
Q1 was a phenomenal quarter for convalt in terms of extending our reach of Partners. In addition to doubling down on cloud marketplaces, we announced major Partnerships across the ecosystem.
We formed a strategic alliance with delight to help Enterprises around the world, fortify the defenses and swiftly recover from outages and cyber attacks.
We took our partnership with crowdstrike to the next level. Announcing an expanded collaboration that brings together their Elite incident response services, with our industry-leading, recovery expertise.
These Services help, customers, improve Readiness, respond faster, and Achieve cleaner. Recoveries.
Sanjay Mirchandani: From the main stage of HPE Discover Conference, HPE and CommVault announced a strategic partnership to deliver advanced cyber resilience, data protection, and disaster recovery capabilities for enterprise hybrid cloud environments. Lastly, in partnership with Kindle, we announced incident recovery. This holistic solution helps customers mitigate risk, avoid the high cost of downtime and regulatory fines, improve cyber resilience, and enable continuous business in the face of cyber threats. And finally, our third driver is our market leading innovation, which continues to receive major accolades. For the 14th consecutive time, CommVault was named the leader. in the Gartner Magic Quadrant for Backup and Data Protection Platform.
From the main stage of hpe discover conference hpe and convalt announced a strategic partnership to deliver Advanced cyber resilience data protection and Disaster Recovery capabilities for Enterprise hybrid Cloud environments.
Lastly, in partnership with Kindra we announced incident. Recovery Services
This holistic solution, helps customers, mitigate risk, avoid the high cost of downtime, and Regulatory fines improve cyber resilience and enable continuous business in the face of cyber threats.
And finally, our third driver is our market-leading innovation, which continues to receive major accolades.
For the 14th consecutive time. Convalt was named a leader.
Sanjay Mirchandani: and DARPA's Critical Capabilities Report. We were ranked number one in five out of six use cases, including multicloud and SaaS. and we received the highest rating for the AI and ML critical capability. Additionally, this year Gartner recognized CommVault as a sample vendor in the Gartner 2025 hype cycle for data security. In Q1, CommVault also won the Outstanding Cyber Resilience Award from Cyber Defense. We will continue to innovate so our customers can address their most critical resilience challenge. Protecting AI data is part of that. As a Gartner Security and Risk Management Summit in June, analysts reported by 2028, 25% of enterprise breaches will be traced back to AI agent abuse from both external and malicious internal To directly address threats posed by AI and to further advance data security, CommVault recently announced its intent to acquire Satori Cyber, a data and AI security This strategic acquisition will add powerful capabilities that strengthen CommVault's data security offerings and empower customers to use AI in a better governed and more responsible way.
In the Gartner magic quadrant for backup and data protection platforms.
In Gartner's, critical capabilities reports. We were ranked number 1 in 5 out of 6. Use cases, including multicloud and fast.
And we received the highest rating for the AI and ml critical capability.
Additionally, this year Gartner recognized convolve as a sample vendor in the Gartner, 2025 High cycle for data security Technologies.
In q1 combo also won the outstanding cyber resilience award from cyber defense magazine.
We will continue to innovate so our customers can address their most critical resilience challenges. Protecting AI data is part of that.
To directly address stress. Both by Ai. And to further Advanced Data, security combo, recently announced its intent to acquire stori cyber a data and AI security company.
Sanjay Mirchandani: The transaction is expected to close later this quarter, so we'll share more on our next earnings call.
This strategic acquisition will add powerful capabilities that strengthen conval's data, security offerings and Empower customers to use AI in a better governed and more responsible way.
Sanjay Mirchandani: The bottom line, we have an industry leading cyber resilience platform, an aggressive AI minded innovation roadmap, and the proven execution customers rely on to keep their businesses uninterrupted.
The transaction is expected to close later this quarter, so we'll share more on our next earnings call.
The bottom line.
Sanjay Mirchandani: We hope you can join us in New York City at CommVault Shift on November 11th and 12th as we usher in a whole new era of cloud-native and cyber-resilience readiness.
We have an industry-leading cyber resilience platform and an aggressive, AI-minded innovation roadmap, and the proven execution customers rely on to keep their businesses uninterrupted.
Jen DiRico: Now, I'll turn it over to our Chief Financial Officer, Jen DiRico, to discuss our results. Thanks, Sanjay. As Sanjay mentioned, we delivered a strong start to the The momentum in the cyber resilience market remains strong. Our brand message continues to gain traction. Customer demand is increasing, and our team is effectively leveraging a record number of opportunities.
We hope you can join us in New York City at combo shift on November 11th and 12th as we usher in a whole new era of cloud native and cyber resilience readiness.
Now I'll turn it over to our Chief Financial Officer genter, Rico to discuss our results.
Thanks, Andre.
As Sanjay mentioned, we delivered a strong start to the fiscal year.
The momentum in the Cyber resilience Market remains strong. Our brand message continues to gain traction. Customer demand is increasing and our team is effectively leveraging a record number of opportunities.
Jen DiRico: I would like to express my gratitude to all the Vaulters whose efforts contributed to our outstanding first quarter results. positioning us for continued success throughout the fiscal year.
I would like to express my gratitude to all the Walters, whose efforts contributed to our outstanding first quarter results.
Positioning us for continued success, throughout the fiscal year.
Jen DiRico: Now I'll discuss our Q1 results and operating metrics, followed by a discussion of guidance for Q2 and FY21. Please note that all growth rates are on a year-over-year basis and less otherwise specified. Total annual recurring revenue increased by 24% to $996 million on a reported basis. On a constant currency basis, applying March 31st FX rates, organic net new ARR grew by $40 million quarter over quarter, a new quarterly record. For a comparison of FX Adjusted ARR with previous quarters, please refer to our earnings presentation. Subscription ARR grew 33% to $844 million. representing 30% growth on a constant currency basis.
Now, I'll discuss our q1 results and operating metrics followed by a discussion of guidance for Q2 and FY, 26.
Please note that all growth rates are on a year-over-year basis, unless otherwise specified.
Total annual recurring Revenue increased by 24% to 9996 million on a reported basis.
On a constant currency basis, applying March, 31st FX rates.
Organik net, new ARR, grew by 40 million quarter, over quarter. A new quarterly record.
For our comparison of FX adjusted ARR, with previous quarters. Please. Refer to our earnings presentation.
Subscriptions grew 33% to 844 million.
Jen DiRico: This was led by an impressive 63% increase in SaaS ARR to $307 million, or 60% growth in constant currency. Subscription ARR now constitutes 85% of total ARR, compared to 79% one year ago. As a reminder, we view subscription ARR as the best indicator of a company's growth profile.
Representing 30% growth on a constant currency basis.
This was led by an impressive 63% increase in SAS ARR to 307 million or 60% growth in constant currency.
Subscription, ARR now constitutes 85% of total error compared to 79% 1 year ago.
As a reminder, we view subscription are as the best indicator of the company's growth profile.
Jen DiRico: Now I'll discuss Q1 Revenue Trends. Total revenue increased by 26% to $282 million. driven by 46% rise in subscription revenue. This growth was supported by an exceptionally strong land and expand quarter for both Term Software and SAS, with gains across regions, industries, and transaction sizes. including a significant increase in software transactions exceeding $1 million. Revenue from term software transactions exceeding $100,000, increased by 39%, reflecting robust growth in both transaction volume and average deal size. Also, we acquired approximately 700 net new subscription customers and total subscription customers are now approaching 13,000. Customer expansion remained robust, with Q1 SaaS net dollar retention of 125%, as a result of both successful upsell and cross-sell initiatives.
Now I'll discuss q1 Revenue trends.
Total revenue increased by 26% to $282 million.
Driven by 46% rise in subscription Revenue.
This growth was supported by an exceptionally strong land and expand quarter for both terms software and SAS with gains across regions.
Industries and transaction sizes.
Including a significant increase in software transactions exceeding, 1 million.
Revenue from term software transactions, exceeding 100,000 dollars, increased by 39% reflecting robust growth in both transaction volume and average deal size.
Also, we acquired approximately 700, net, new subscription customers and total subscription customers are now approaching 13,000.
Jen DiRico: Our leading solutions, M365, and AirGap Protect, continue to achieve double-digit quarter-over-quarter growth, complemented by substantial contributions from new products that support customers' business continuity strategies. such as Cleanroom and Active Directory. During the quarter, we worked closely with a North American aerospace company to modernize its cyber-resilience strategy, while remaining audit-ready for FAA and aircraft manufacturer compliance. the customer-implemented CommVault's Autonomous Recovery, AirGap Protect, and Active Directory to back up their critical data and support their regulatory requirements. The number of SAS customers utilizing two or more products increased by 45 percent. As Sanjay highlighted, SAS continues to be the preferred route to market for many companies.
Customer expansion, remained robust with q1 SAS, net dollar retention of 125% as a result of both successful upsell and cross-sell initiatives.
Our leading Solutions, M365 and air gap, protect continue to achieve double digit quarter over quarter growth.
Complemented by substantial contributions from new products that support customers' business continuity strategies.
Such as clean room and active directory.
During the quarter, we worked closely with a North American aerospace company to modernize its cyber resilience strategy while remaining audit-ready for FAA and aircraft manufacturer compliance.
The customer implemented combat's autonomous recovery.
To back up their critical data, and support their regulatory requirements.
The number of SAS customers utilizing 2, or more products increased by 45%.
Jen DiRico: In this quarter, we observed exponential growth through the hyperscaler marketplace. Another positive development is the 70% increase in customers generating over $100,000 in SAS ARR during Q1. These larger SAS customers now constitute more than 30% of our SAS customer base. Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multiproduct adoption than our overall SAS. For example, a Fortune 500 life insurance company adopted CommVault after experiencing limitations with native tools for cloud application protection and recovery. The organization standardized M365, files and objects, and VMs on CommVault Cloud, resulting in the elimination of silos and changes in recovery time.
As Sanjay, highlighted SAS continues to be the preferred route to market for many customers. And this quarter, we observed exponential growth through the hyperscaler marketplaces.
Another positive development is the 70% increase in customers generating over 100,000 dollars in SAS ARR during q1.
These larger SAS customers. Now constitute more than 30% of our SAS customer base.
Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multi-product adoption than our overall SaaS base.
For example, a Fortune 500 life insurance company adopted Commvault after experiencing limitations with native tools for cloud application protection and recovery.
The organization standardized M365 files and objects and VMS on Comal clouds.
Jen DiRico: With the implementation of AirGaP Protect, Active Directory, and Cloud Rewind, the company adjusted its data security approach, addressed compliance requirements, and enhanced the process of environment rebuild.
Resulting in the elimination of silos and changes in recovery time.
With the implementation of air gap, protect active directory, and Cloud rewind, the company adjusted, its data security approach address, compliance requirements, and enhance the process of environmental rebuilds.
Jen DiRico: This example underscores the long-term monetization potential of our platform. As I mentioned in previous calls, we will continue to lean into this crossbow motion in the coming quarter.
this example, underscores the long-term monetization potential of our platform,
As I mentioned in previous calls, we will continue to lean into this cross-sell motion in the coming quarter.
Jen DiRico: Now I'll discuss our profitability and free cash flow, which demonstrates our commitment to a responsible growth philosophy. Fiscal Q1 growth margins were 82.4%. Consistent with our previously shared expectation for total growth margins to remain in the low 80% range. Operating expenses of $173 million dollars represented 61% of total revenue, consistent with the prior quarter and prior fiscal year. Q1 operating expenses included planned headcount growth, previously disclosed investments to support our strong ongoing growth trajectory, and higher commission and bonuses on record sales results. non-GAAP EBIT grew 21% to $58 million and non-GAAP EBIT margin was 20.7%.
Now, I'll discuss our profitability and free cash flow.
Which demonstrates our commitment to a responsible growth philosophy.
Fiscal, q1, gross. Margins were 82.4% consistent with our previously. Shared expectations for total gross margins, to remain in the low 80% range.
Operating expenses of $173 million represented 61% of total revenue.
Consistent with the prior quarter and prior fiscal year.
Q1 operating expenses included planned headcount growth.
Previously disclosed investments to support our strong ongoing growth trajectory and higher commissions and bonuses on record sales results.
Jen DiRico: In Q1, we achieved 47 on a rule of 40 basis, which reflects a healthy balance between revenue and profitability.
Non-gaap, even grew 21% to 58 million. And non-gaap even margin was 20.7%.
In Q1, we achieved 47 on a Rule of 40 basis, which reflects a healthy balance between revenue and profitability.
Jen DiRico: Turning the Key Balance Sheet and Cash Flow Indicator. We ended Q1 with no debt and a cash position of $363 million. Free cash flow was $30 million, primarily driven by continued strength and deferred revenue from SAS contracts and solid software subscription renewal. During the quarter, we repurchased $15 million of stock, and our diluted share count remained flat at $45 million shares.
Turning to key balance sheet, and cash flow indicators.
We ended Q1 with no debt and a cash position of $363 million.
free cash flow was $30 million, primarily driven by continued, strength, and deferred revenue, from SAS contracts and solid software subscription renewals
During the quarter, we repurchased 15 million dollars of stock and our diluted share count remained flat at 45 million shares.
Jen DiRico: As Sanjay mentioned, we announced our intention to acquire Satori Cyber, a data and AI security company. We believe there are extensive opportunities to help customers responsibly utilize AI in their production environments and Satori can help CommVault accelerate this vision. The transaction will be funded from our international cash balance.
As Sanjay mentioned, we announced Our intention to acquire satoori, cyber a data and AI security company.
We believe there are extensive opportunities to help customers responsibly utilize AI in their production environments.
And stori can help combat accelerate this vision.
Jen DiRico: We expect the transaction to close later this quarter and to be modestly diluted to margins for the next several quarters.
The transaction will be funded from our International cash balance.
We expect the transaction to close layer this quarter, and to be modestly diluted to margins for the next several quarters.
Jen DiRico: Now I'll discuss our outlook for Q2 and our updated outlook for fiscal year 2016. For fiscal Q2-26, we expect subscription revenue, which includes both the software portion of term-based licenses and SAS, to be in the range of $174 to $176 million. This represents 31% year-over-year growth at the midpoint. We expect total revenue to be in the range of $272 to $274 million, with growth of 17% at the minimum. At these revenue levels, we expect Q2 consolidated gross margins to be in the range of 81 to 82 percent. We expect Q2 non-gap EBIT margins of approximately 20%, including the integration of Satori side.
Now, I'll discuss our outlook for Q2 and our updated outlook for fiscal year 26.
For fiscal Q2 26, we expect subscription Revenue which includes both the software portion of term-based licenses and SAS to be in the range of 174 to 176 million.
This represents 31% year-over-year growth at the midpoint.
We expect total revenue to be in the range of $272 million to $274 million, with growth of 17% at the midpoint.
At these Revenue levels. We expect 22 Consolidated gross margins to be in the range of 81 to 82%.
Approximately 20%, including the integration of Satori Cyber.
Jen DiRico: Now I'm happy to share that we are raising our fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of March 31st, 2025. For a historical comparison, please refer to our Q1 Earnings Once presentation. We expect constant currency FY26 total ARR growth of 18% year over year. This will be driven by subscription error, which we expect to increase by 24% year-over-year. from a full-year fiscal 26 revenue. We expect subscription revenue to be in the range of $753 to $757 million, growing 28% at the midpoint with strong contributions from both term software licenses and SaaS.
Now, I'm happy to share that. We are raising our fiscal year 2026 guidance.
as a reminder, our guidance is in constant currency using FX rates as of March, 31st 2025
For a historical comparison, please refer to our Q1 earnings presentation.
We expect constant currency fy6 total ARR growth of 18% year-over-year.
Which we expect to increase by 24% year-over-year.
From a full year, fiscal, 26 Revenue perspective. We expect subscription Revenue to be in the range of 753 to 757 million growing 28%, at the midpoint with strong contributions, from both terms software, licenses and SAS.
Jen DiRico: We expect total revenue of $1.161 to $1.165 billion, an increase of 17% at the minute.
We expect total revenue of $1.161 billion to $1.165 billion, an increase of 17% at the midpoint.
Jen DiRico: Moving through our full year fiscal 26 margin, EBIT and cash flow outlook. We continue to expect gross margins to be 81 to 82%. This range reflects continued growth in our SaaS platform, which carries a different gross margin profile than SaaS. We now expect non-gap EBIT margins of approximately 20.5%, including the dilutive impact of Satori. Non-gap even margins also reflect our ongoing investments in additional growth driving initiatives. We continue to expect full-year free cash flow of $210 to $215 million. This guidance reflects our transition to a cash taxpayer, following the full utilization of our tax carry-forward credits in fiscal 2025.
Moving to our full year. Fiscal 26 margin ebit and cash flow Outlook.
We continue to expect gross margins to be 81% to 82%.
This range reflects continued growth in our SAS platform, which carries a different gross margin profile than software.
We now expect non-gaap even margins of approximately 20.5% including the dilutive impact of stori.
Non-GAAP even margins also reflect our ongoing investments in additional growth-driving initiatives.
We continue to expect full year, free cash flow of 210 to 215 million.
Jen DiRico: In closing, our Q1 results underscore the strong and accelerating demand for our cyber resilience platform. This momentum, combined with our focused investments, positions us well to capture a greater share of the market in FY26 and beyond. While we remain mindful of the broader macro environment, our updated guidance reflects our confidence in the opportunity ahead and our ability to execute against it.
This guidance reflects our transition to a cash taxpayer, following the full utilization of our tax carryforward, with a presence in fiscal 2025.
In closing, our q1 results, underscore the strong and accelerating demand for our cyber resilience platform.
This momentum combined with our focused Investments positions us well to capture a greater share of the market in FY, 26 and Beyond.
Mike Melnyk: Now, I will turn it back to the operator to open the line for questions. Operator. Thank you.
While we remain mindful of the broader macro environment, our updated guidance, reflects our confidence in the opportunity ahead and our ability to execute against it.
Now, I will turn it back to the operator, to open the line for questions.
Operator.
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Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press *1 on your telephone keypad to raise your hand and join the queue. If you would like to join a question, simply press *1 again.
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Aaron Rakers: And our first question comes from the line of Aaron Rakers with Wells Fargo. Yeah, thanks for taking the question and congrats on the results, continued solid execution. I guess two quick questions for me. I know, Jen, you had mentioned, you know, the operating margin in both this quarter as well as through the full fiscal year does reflect the dilution impact of Satori. I'm curious, you know, from a revenue perspective, are you factoring in any kind of contributions from that acquisition? And then as a second question, you know, a lot of, you know, commentary around the cross-sell upsell opportunity.
In our first question comes from the line of Aaron rakers with Wells, Fargo, your line is open.
Yeah. Thanks, uh, for taking a question and congrats on the results. Uh, continued, solid execution, I guess, 2 quick questions for me. I, I know Jen. You had mentioned, you know, the operating margin in both this quarter, as well as through the full fiscal year. Does reflect the dilution impact of stori? I'm curious, you know, from a revenue perspective, are you factoring in any kind of contributions from that?
Aaron Rakers: I think last quarter you talked about, you know, roughly 30% of your SaaS customers purchasing more than, you know, one solution. I'm just curious, I know you mentioned 45% growth, but, you know, how do we think about that as we move forward? How successful have you been and, you know, where do you think that can ultimately get to? Thank you.
Jen DiRico: Yeah, thanks so much for the question, Aaron. I'll start with the first one around Satori. So, we're incredibly excited about the Satori acquisition. It absolutely adds technology and talent as we think about expanding the breadth and depth of our platform. From an overall top-line perspective, it is immaterial and not really, does not factor into any sort of Uplift and Revenue Guidance. As it relates to the cross sell, we have made really good progress. It's early innings. You heard me say last quarter, this is the first quarter, we're actually like focused on it as a company.
Acquisition. Uh, and then, as a second question, you know, a lot of, you know, commentary around the cross, sell upsell opportunity, I think, last quarter, you talked about, you know, roughly 30% of your SAS customers, uh, purchasing more than, you know, 1 solution. I, I'm just curious. I know you mentioned 45% growth, but you know, how how do we think about that as we move forward? How successful have you been? And, and you know, where do you think that can ultimately get to thank you. Yeah, thanks so much for the question. Aaron, I'll start with the first 1 around Satori, so we're incredibly excited about the Surrey acquisition. It absolutely adds technology, and talent as we think about, uh, expanding our, the breadth and depth of our platform from an overall, Top Line perspective. It is immaterial, uh, and, um, not really does not factor into any sort of, uh,
Uplift in Revenue guidance.
Jen DiRico: You heard me say in my prepared remarks that it is, we saw an increase of 45% from a customer perspective using two or more. The other things I would add to you is the fact that you heard in my scripts that we're seeing numerous customers purchase five or six offerings, right? So there's great progress there. Another stat I'll share with you is within the SAS net dollar retention rate. Historically, and I've shared with you that that mix has been one third cross sell. This past quarter, it was 40%. And so ultimately, I think we're seeing really good traction.
Last quarter, this is the first quarter. We're actually focused on it as a company. You heard me say in my prepared remarks that we saw an increase of 45% from a customer perspective using 2 or more.
The other things I would add to you is the fact that, um, you heard my script that we're seeing numerous customers purchase 5 or 6 offerings, right? So there's that, there's great progress there.
Jen DiRico: And then in addition to that, our security SKUs grew double digits quarter over quarter contributing into that cross sell and made up 20% of our net new ARR. Thank you.
Another stat I'll share with you is within the saset dollar retention rate, historically. And I've shared with you that that mix has been 1/3 cross sell this past quarter, it was 40%. Uh, and so ultimately, I think, uh, we're seeing really good traction. And then, in addition to that our security skews, uh, grew double digits quarter over quarter contributing into that cross sell, and made up 20% of our net new ARR.
Thank you.
Jason Ader: Our next question comes from the line of Jason Ader with William Blair. Your line is Thank you.
Our next question comes from the line of Jason, either with William Blair. Your line is open.
Jason Ader: Can you guys talk about the Bundling strategy that you have right now, you have a lot of different products, obviously, you know, seeing good success with cross sell. What is the sort of, you know, kind of high level bundling strategy? Is it still a work in progress? Are you feeling good about where you sit with bundling?
Thank you. Can you guys talk about the, um,
The bundling strategy that you have. Right now, you have a lot of different products obviously um you know, seeing good success with cross sell what is the sort of um you know, kind of high level bundling strategy? Is it still a work in progress? Are you feeling good about where you sit with bundles today?
Sanjay Mirchandani: Hey Jason, Sanjay, good to hear from you. You know, so there are some logical bundles that we offer customers today that just make sense together, like Cleanroom and Active Directory, or Office 365 and Active Directory. So we have those sort of packages that customers tend to avail of naturally because they work better together. As our cyber resilience platform continues to evolve, you'll see more of these logical capabilities coming together. with the value proposition. And in November, as I said, in my prepared comments, we have shift and you'll hear a lot more about how we're looking at our platform there.
Hey, Jason Sanjay. Uh, good to hear from you, you know? So there are some logical bundles that we offer customers today. That that just makes sense together like clean room and active directory, um or Office 365 and active directory. So we have those those sort of packages that that customers tend to Avail of naturally because they work better together as our cyber resilience platform uh continues to evolve, you know, you'll see more of these logical capabilities coming together. Um
Sanjay Mirchandani: So hold that question for a little longer, you'll see a lot more there. Thank you.
With, you know, with with with the value proposition uh and in November, as I said in my prepared comments, we have shift and you'll hear a lot more about how we, how we're looking at our platform, uh, there. So, so, hold that question, just for a little longer and you'll see a lot more there.
Thank you.
Howard Ma: Our next question comes from the line of Howard Ma with Guggenheim Security. Your line is... Great. Thanks and excellent quarter, guys. I have one for Sanjay and then one for Jen.
Our next question comes from the line of Howard Ma with Jefferies.
Howard Ma: For Sanjay, when you think about supplementing future growth through M&A, what are some of the key categories by which your team evaluates opportunities? And then on the tutorial acquisition, are you seeing strong evidence that customers want to procure governance and policy enforcement for AI training from their data protection vendor as opposed to other infrastructure software providers? Thanks. Hey, Howard.
Thanks and excellent quarter, guys, I I have 1 for Sanjay, then 1 for Jen for Sanjay. What do you think about supplementing future growth through m&a? What are some of the key categories by which your team evaluates opportunities? And then on the tutorial acquisition, are you seeing strong evidence that customers want to procure, governance and and policy enforcement for AI training from their data protection, vendor that as opposed to other infrastructure software providers? Thanks,
Sanjay Mirchandani: So, you know, if you look, it's going to be hard for me to tell you what I'm going after, but I'll tell you what I've gone after. So, you know, if you look at the sort of history of acquisitions we've made, they've been really, if you look at Trapex, you know, and what Trapex, you know, brought to us. If you look at Tranex, these were core security and cloud-native capabilities as the platform evolved. So, as customers started moving more complicated workloads, building cloud-native workloads in the cloud, in a multi-cloud environment, we wanted to make sure that the way we protected those and gave resilience, you know, one size doesn't fit all.
Hey, Howard. So you know how we are, you know, if you look like it's going to be hard for me to tell you what I'm going after, but I'll tell you what I've got after. So, you know, if you look at, if you look at the sort of history of acquisitions we've made, they've been really, uh, if you look at traffic, um, you know, and what traffic...
You know, brought to us. If you look at, uh, electronics.
Sanjay Mirchandani: So, they fleshed out our ability, for example, to keep customers more secure at the front and then, in turn, protect them in the cloud-native way. Now, when we took on Clumio, Clumio gave us... very good, large AI data protection capabilities. Now with Satori, you're saying that we're bringing those two things together. You got the whole visibility, observability and policy enforcement across semi-structured and structured data that tacks on very well to the unstructured data pieces that our platform has. and also as customers start training models and using AI internally, policy enforcement and observability on LLMs and other things, and the data that trains those models naturally fits that.
Uh, these first, these were core security, and and Cloud, native capabilities as a platform evolved. So, as customers started, moving more, complicated workloads. Building Cloud native workloads in the cloud. In the, in the, in the multi Cloud environment. We wanted to make sure that the way we protected those and gave resilience, um, you know, with 1 size doesn't fit all. So they, they fleshed out our ability for example, to be to keep customers more secure at the front.
And then in turn protect them in the cloud native uh, way. Now, when we took on clumio kumio gave us um,
Very good large, uh, AI data protection capabilities. Now, with, with Satori you're saying that we're bringing those 2 things together. You got, they, you got the whole visibility observability and policy enforcement across semi-structured and structured data that tax on very well to. The unstructured data pieces that our platform has
Sanjay Mirchandani: So it's not, I'll answer both your questions together. So it's not about separate policy enforcement on a separate tool set for just AI, and there will be a place for that. But this is really as the models get trained internally, and your employees are using the technology, it gets, you know, you have the same level of visibility as to what's being fed, what's being used, what's being queried. So you get to enforce policy that way. And it'll all be natural. It'll all be part of the platform. So it'll be, we're going to integrate it very aggressively so that it's just a natural way to work with the platform, what we do already.
Sanjay Mirchandani: We give you policies already. This isn't, this isn't. that's how I Got it. That makes a lot of sense, Sanjay.
What's being used, what's been query? So you get you get to enforce policy that way and it'll all be natural. It'll all be part of the platform so uh it'll be we're going to integrate it very aggressively so that it's just a natural way to work with the platform. What we do already, we give you policies, already. This is a, this is an attachment.
That's how I think about it.
Jen DiRico: For Jen, when we look at the full-year revenue guidance being raised by more than the Q1 upside, how much do the quality and the size of your renewal base this year versus last year play a factor, including, I guess, potential for seed expansion and security cross-sell? Yeah, thanks for the question, Howard. Actually, as we think about the overall revenue guidance, the overall renewal base has been already considered. And ultimately, what you're seeing in the guide is the strength of the business, both on the software and the staff side.
Yeah, got it. That makes a lot of sense Sanjay for Jen. When we look at the full year, Revenue guidance being raised by more than the q1 upside, how much do the quality and, and the size of your renewal base this year versus last year, play a factor as including uh, I guess potential for seed expansion and security cross sell.
Yeah, thanks for the question, Howard. Uh actually, as we think about the overall Revenue guidance, um, the overall renewal based has been already considered and ultimately, what you're seeing in the guide is the strength of the business, both on the software and the staff side of things.
Jen DiRico: Great, thank you.
Right. Thank you.
Rudy Kessinger: Next question comes from the line of Rudy Kessinger with T.A. Davidson. Great, thanks for taking my questions. Very strong results all around. I want to dig in to maybe just the net new ARR in Q1. Does look like it's skewed much more towards term license relative to SAS, just versus the trend over last year. Very strong term license, net new ARR.
Next question comes from the line of fruity kasinger with da Davidson your line is open.
Great, thanks for taking my questions. Um,
Jen DiRico: Anything to call out there in terms of how deal dynamics shaped up, or any color on maybe what was a bit weaker of a SAS net new ARR quarter. Yeah, so first of all, I would say our SaaS business performed as expected and in line, and we're very pleased with that. The delta did come from overperformance in the software side of things. At the very, very end of the quarter, we did benefit from higher close rates on a few software deals. As it relates to, as we think about the SaaS business overall and overall net new ARR on a quarterly basis, we believe going forward that you can see north of $20 million in SaaS net new ARR, and then on the go forward, around $40 million total net new ARR quarter over quarter for the remaining of the year.
Very strong results all around. Um, I want to dig into maybe just the net new ARR in Q1. It does look like it's skewed much more towards term licenses relative to SaaS. Just versus the trend over last year, um, very strong term license net new ARR. Is there anything to call out there in terms of how deal dynamics shaped up or any color on maybe what was a bit weaker of a SaaS net new ARR quarter?
Yeah, so first of all, I would say our SAS business performed as expected and in line. Uh, and we're very pleased with that. The Delta did come from over performance in the software side of things. At the very, very end of the quarter, we did benefit from higher close rates on a a few software deals uh as it relates as we think about the SAS business overall and overall net new error on a quarterly basis. We Believe going forward that you can see north of 20 million in the SAS net, new are and then on the go forward,
Uh, around 40 million, total net new error quarter over quarter for the remaining of the year.
Jen DiRico: Okay, I was going to ask about kind of the sequencing of net new AR for the quarters that kind of answers that. I guess maybe a follow up on that comment you just made about some higher close rates towards the very, very end of the quarter. Could you just talk about the linearity of the quarter at large and how things trended month to month? Yeah, I think, first of all, when we started the quarter, we always expected that we'd be between 30 and 35 million of net new ARR. And at the very, very end, closures kind of improved quite honestly, in like the last week or so of the quarter on a few large deals.
Okay. I I was gonna ask about kind of the the sequencing of of net, new are for the quarters that kind of answers that I guess. Maybe it follow up on that comment you just made about some higher close rates towards the very, very end of the quarter. Could you just talk about the linearity of the quarter um at large and how things trended month-to-month?
Jen DiRico: And that's really what you saw from a linearity perspective. Very helpful. Thank you. Yeah, of course.
And 35 million of net new are and at the very very end close reach kind of improved honestly in like the last week or so of the quarter on a few large deals and that's really what you saw uh from a linearity perspective.
Very helpful. Thank
Eric Heath: Thank you. Next question comes from the line of Eric Heath with KeyBank Capital Markets. Your line is open. I'll let us know if you want to be unfed. Yeah, I'll start. And then of course, Sanjay, feel free to chime in. From a federal perspective, we feel incredibly good about our Fed business. It performed in line with our expectations in Q1. And overall, we expect to see similar seasonality for the first half of the year, because we do know that overall, the Fed is stronger in the first half of the year. And ultimately, I think what we're seeing is that our FedRAMP high certification continues to be a competitive advantage for us.
ya. Of course, thank you.
Next question comes from the line of Eric Keith with Key Bank, Capital markets, your line is open.
Hey, thanks for taking the question and congrats to Sanjay and Jen as well. Um I'll fed if I could Sanjay just maybe some of the assumptions. Uh you're embedding in the guide. Both for on Jen. Jen? And um feedback you're hearing uh because I know it is a a big quarter for you guys in fed for 2.
Jen DiRico: That's something.
Yeah, I'll start. And then, of course, Andre, feel free to chime in. From a federal perspective, we feel incredibly good about our Fed business. It performed in line with our expectations in Q1, and overall, we expect to see similar seasonality for the first half of the year because we do know that overall the Fed is stronger in the first half of the year. Um, and ultimately, I think what we're seeing is that our FedRAMP High certification continues to be a competitive advantage for us.
Eric Heath: You were hard to hear, Eric. Your question was just around Fed, right? Right. Okay, yeah, Jen, Jen, man, bye.
To sum it up.
And you were hard to hear. Eric you your question was just around fed, right?
Right. Right.
Jen DiRico: And if I could ask a follow up, Jen, just on the margins, I know you covered some of For all the reasons for OPEX in the quarter, but just anything you can share why we're not seeing more drop to the bottom. Maybe just help a little bit more on granularity on organic. Sure. So let me just start by saying, I think we're incredibly proud of the overall performance that business performed in line with our expectations. We had a record quarter, and that related to not only increased bonus and commissions, as well as our regular planned headcount additions associated with the investments we plan to make.
Okay. Yeah. And if I could ask a follow-up, Jen, just on the margins. I know you covered some of it. Um,
The reasons for Opex in the quarter but just anything, you can share, why we're not seeing more drop to the bottom line and, and maybe just help a little bit, uh, more on granularity on. Um, organic operating margins for the year. Thanks.
Jen DiRico: Now, I would just highlight the fact that we landed at 47 on a rule of 40. So I think overall, we are balancing the business and profitability and growth quite well. As we think out for the rest of the year, like I said, the diluted solutory is the only dilutive impact. It's about 50 bits. Other than that, the business is performing exactly how we expected to my original guidance from an overall perspective. And just one more element of color on that is a SaaS business is growing. And it's, you know, 63% year-on-year-on-year on an ARR basis.
Jen DiRico: And we're seeing more workloads and, you know, that has a different margin profile, which in the overall scheme of things. is reflected. So it's goodness. So the growth is there. And we had, you know, and we're particularly proud of the 47 on Rule 40. And I would just close out with saying that from a guidance perspective, our original guidance showed a rule of 36 and a rule of 40. And my updated guidance shows a rule of 38. So there's already performance and strong balance there.
With the Investments, we plan to make. Now I would just highlight the fact that we landed at 47 on a rule of 40. So I think overall we are balancing the business and profitability and growth quite well. As we think out for the rest of the year, like I said, the diluted stator is the only dilute of impact. It's about 50 bits. Other than that, the business is performing exactly how we expected to my original guidance, uh, from an overall. And then just 1 1 more element of color on that is a SAS business is growing and it's, you know, grew 63% year on year on year in and year out basis and we're seeing more workloads and, and, you know, that has a different margin profile, which in the overall scheme of things, you know, um, is reflected. So it's goodness. So the growth is there, uh, and we had a, you know, and particularly proud of the 47 on the rule 40. And I would just close out with saying that, from a guidance perspective, our original guidance showed a rule of, uh, 36 and a rule of 40 and our, my updated guidance shows a rule of 38, so there's already performance and
strong balance there.
James Fish: Our next question comes from the line of James Fish with Piper Sandler. Your line is Hey guys, I want to go back to something, Jen, you said, you know, Microsoft 365 has been sort of a killer application, you know, the lion's share of metallic, but what are you seeing there with either number of seats protected, or however you want to talk about it versus what are you seeing with some of those newer solutions like Cloud Rewind? As you mentioned, some of them are certainly become substantial.
Have our next question. Comes from the line of James fish with Piper Sandler. Your line is open.
Jen DiRico: So in other words, what I'm really asking is, is there a way to slice sort of the contribution of I think you said Microsoft 365 and AirGap versus some of the other Sure. So from an M365 and AirGap Protect, right, those were our oldest products and our most mature, and so they continue to carry the lion's share of the ARR. However, our security offerings, ThreatWise, ThreatScan, CleanRoom, Pranex, Risk Analysis, those grew double digits quarter over quarter and made up 20% of our net new ARR. and we're happy with it. Yep, understood.
Hey guys, uh want to go back to something Jen. You said, you know, Microsoft 365 has been sort of a killer application, you know, the Lion Share of of metallic. But what are you seeing there, with either a number of seats protected or however, you want to talk about it? Verse, what are you seeing with some of those newer Solutions like Cloud rewind as as you mentioned, some of them are certainly comes substantial. So so in other words, what I'm really asking is, is there a way to slice sort of the contribution of, I think you said Microsoft 365 and air gap versus some of the other newer products?
Sure. So from an M365 and air gap, protect right. Those are our oldest products and our most mature, and so they continue to carry the line share of the ARR. However our security offerings, uh, threat wise threat, scan, clean, room panics,
Risk analysis. Those grew double digits quarter over quarter and made up 20% of our net new are
Okay, we're happy.
Sanjay Mirchandani: And then Sanjay, conversation we always have is just shots on goal. I guess, how are you feeling about what you're getting for shots on goal? I know there's been a lot more, you know, marketing programs going on and Jen related to that, you know, we're about 85% subscription now. So is there a way to think about how much is left for migrations within the base? Sure, so I would, first of all, start by saying we're really pleased with the overall performance of 85% of the business being on the recurring base of subscription. As we think about migrations, right, and overall, like our perpetual business continues to be a small amount of the overall revenue.
Yep. Understood understood. Um, and then Sanjay conversation, we always have is is just shots on goal. I guess, how are you feeling about what you're getting for shots on goal? I know there's been a lot more, you know, marketing programs going on and uh, Jen related to that, you know, we're we're about 85% subscription now. So, is there a way to think about how much is left for migrations within the base?
You want to go, Jen?
Sanjay Mirchandani: We saw that come down this quarter. We're focusing the business on subscription, right? But ultimately, what we're seeing is more and more of our ARR is coming from our land business, right? And so, ultimately, the growth is not really coming from a conversion that's much more about land, in particular, on the SaaS side. And from a conversion point of view, we've always held the line that we don't want to do anything unnatural. Customers have choices, and we give them the choice. We lean into where it's a subscription platform, be it SaaS or term license, but if for whatever reason, customers wish to go perpetual, they are.
Sure. So I was first of all, start by saying we're really pleased with the overall performance of uh 85% of the business, being on the recurring base of subscription. Um as we think about migrations, right and overall like our Perpetual business continues to be uh a small amount of the overall Revenue. We saw that come down this quarter, we're focusing the business on subscription, right? But ultimately what we're seeing is more more and more of our R is coming from our land business, right? And so ultimately, the growth is not really coming from the conversions. It's much more about land. In particular, on the south side and and and from a conversion point of view, we we've always held, we've always held the
Sanjay Mirchandani: And then as it relates to your question around more shots on goal, right, we said this year was another year of investment to continue to maintain our momentum and growth. And you're seeing that in the top line, because it's absolutely leading to more shots on goal and our execution continues to remain incredibly high.
The line that we don't want to do anything unnatural because the customers have choices and we give them the choice. We we lean we lean into words, subscription platform, you know, be it tasks, or or term license. But if, if for whatever reason customers, wish to go, Perpetual they they have that choice right now. And then as it relates to your question, around more shots on goal, right? We said this year was another year of investment to continue to maintain our momentum and growth and you're seeing that in the Top Line because it's absolutely leading to more shots on goal and our execution continues to remain, incredibly High.
Tom Blakey: Our next question comes from the line of Tom Blakey with Kantor.
Tom Blakey: Your line is open. Hey guys, thank you for taking my questions and congratulations on a stellar fiscal 1Q here. Maybe for starters, two questions. Sanjay, could you maybe give us an update on the potential competitive displacements and maybe consolidating workloads on CommVault? You know, this growth is pretty dynamic and we've been talking about that for a while. I'd love to get a, you know, kind of update there in terms of the sustainability of this dynamic growth. And then, Jen, thank you for that call around the north of 20 million net new ARR from SAS. Can you maybe talk about, you know, any maybe changes there in terms of competition or maybe pricing of whatnot?
Our next question comes from the line of Tom Blakey with Cantor. Your line is open.
Sanjay Mirchandani: We talked about bundling, I think, in a prior question. Or is it just kind of net new conservatism because that doesn't imply a lot of growth on a year-on-year basis from net new ARR that occurred in the last kind of four or five quarters? That'd be helpful. Thank you. Yeah. So, you know, Tom, from a displacement point of view, if you look at just the software on-premise type of capability, that's a market that's growing low single digits. So we're growing in a healthy pattern, which means we are taking share. We're taking share because of a few things.
Prior question. Uh, or is it just kind of net new conservatism because that doesn't imply a lot of growth on a year-on-year basis from net? New are that occurred, uh, in the last kind of 4 or 5 quarters, that'd be helpful. Thank you.
Sanjay Mirchandani: One, our technology continues to lead. I mean, if you look at all the new Gartner reports, our technology continues to lead in every way. Our delivery model with the partner ecosystem has evolved and continues to evolve every quarter. In my prepared comments, I shared, you know, the new partnerships and the impact they're going to have. The third piece is that the problem we solve, the hard problem we solve for customers goes beyond data protection. We're not looking at entire environments on cloud-native. We're looking at true multi-cloud. You know, we're looking at SaaS environments. And so when you, and we make protection for customers, be it a SaaS workload, a cloud-native workload, on-premise workload, completely transparent.
Sanjay Mirchandani: So when you take those, when you take those factors and a customer's... customers have, you know, customers are definitely consolidating, you know, more in this case is not better. Having more vendors, more policies, more, you know, feet on the street to make things work is actually harder. And so you know, there is a there is a definite direction of consolidation to our advantage, because our platform uniquely provides that capability at scale, and does it in a hybrid environment.
Yeah. So you know, time from a from a displacement point of view this if you look at just the software on premise out of capability. That's that's that's a market that's growing low single digits. So we're we're growing in a healthy pattern which means we are taking share. We're taking share because of a few things 1, our technology continues to lead. I mean, if you look at all the new Gartner reports, our technology continues to lead. Uh, in every way our delivery model with the partner, ecosystem has evolved and continues to evolve every quarter uh in my prepared comments, I shared, you know, the new Partnerships and and the impact they're going to have the third piece. Is that the problem, we solve the hard problem, we solve for customers goes beyond data protection. We're now looking at entire environments on cloud native, we're looking at true multi Cloud. You know, we're looking at SAS environments and so when you when you and and we make, we make protection for customers. Be it a SAS workload, a cloud native workload, or an on-premise workload completely transparent. So when you take those, when you take those,
Those factors, uh, and the customers.
Customers have, you know, customers are definitely consolidating. You know, more in this case is not better; having more vendors, more policies, more, you know, feed on the street to make things work is actually harder. And so, you know, there is a definite direction of consolidation to our advantage because our platform uniquely provides that capability at scale and does it in a hybrid environment.
Jen DiRico: And Tom, regarding your overall SaaS, ultimately, what you're seeing is just strength in our overall organic business. Yes, it's on you just hit on the competition element. We're not really seeing too many changes there. Ultimately, customers want our full platform and our SaaS platform absolutely meets the moment. So ultimately, it's just growth in the organic business.
And Tom, regarding your overall staff, ultimately what you're seeing is just strength in our overall organic business.
Yes, I saw you just hit on the competition element. We're not really seeing too many changes there. Ultimately, customers want our full platform and our SAS platform absolutely meets the moment. So ultimately, it's just growth in the organic business.
Itay Kedron: Thank And our last question comes from the line of Itay Kedron with Oppenheimer. Your line is Thanks, you guys. And again, congrats on a great quarter. I had, I guess, a couple for me. First of all, Jen, there's some of the things we hear from the channel that there are customers who are pulling forward calendar 26 budget plans into actually into 25. So I'm kind of wondering, as you look at your strong performance, clearly the market is doing very well. But is there a way for you to tell if there's a pull forward activity within your customers right here right now?
Okay, thank you.
And our last question comes from the line of Ittai Kedron with Oppenheimer. Your line is open.
Uh, thanks you guys and again, congrats on a great quarter, I had a I guess a couple for me. First of all Jen
Jen DiRico: Yeah, thanks for the question. We spend a lot of time with our go to market team here, and we're not seeing any pull forward. It's just strength in the overall market, and our product meeting the needs of customers and our team executing incredibly well.
There's um some of the things we're going to hear from the channel that there are customers. Who are pulling forward calendar, 26 budget plans into actually into 25. Some I'm kind of wondering as you look at your strong performance, clearly the market is doing very well, but is there a way for you to tell if there's a pull forward activity within your customers right here? Right now?
Yeah, thanks for the question. We spent a lot of time with our go to market team here.
In the overall market and our products need the needs of customers and our team executing incredibly well.
Jen DiRico: Excellent. Then maybe as a follow-up, you know, you started a new year. Can you talk about the comp plans? How have they changed? If anything, what are you incentivizing more or less of this year? Sure, so we don't talk, we don't give a lot of details around the comp plans, but what I can tell you is our team is incentivized to absolutely go after overall recurring revenue, and we are balancing the need between meeting the needs of what customers want, but ultimately, it's all aligned. It's just a paper performance.
Excellent. And then maybe as a follow-up. Um you know you started the new year, can you talk about the comp plans, how have they changed? If anything, what are you incentivizing more or less of this year?
Sure. So we don't talk; we don't give a lot of detail.
Around the company.
Itay Kedron: Very good. I appreciate it. Congrats.
Incentivized to absolutely go. After overall, recurring revenue, and we are balancing the need between what meeting the needs of our customers want. So ultimately, it's all mine. The performance. It's just a paper performance.
Unknown Executive: Thank you.
All right, good. I appreciate it. Congrats.
Thank you.
Mike Melnyk: That concludes the question and answer session.
Mike Melnyk: I would like to turn the call back over to Mike Melnyk for closing remarks. Thank you everyone for joining this morning. If you have any additional questions, please feel free to follow up with me by email and also as Sanjay mentioned, we encourage everyone to register for the SHIFT user event in New York City, November 11th and 12th, visit our website for details. Thanks very much.
Call back over to Mike Melnyk for closing remarks.
Thank you everyone for joining this morning. Uh, if you have any additional questions, please feel free to follow up with me by email. And also as Sanjay mentioned, we encourage everyone to register for the uh shift user event in New York, City, November 11th. And 12th uh visit our website for details. Thanks very much.
Desiree: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
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