Q4 2026 Commvault Systems Inc Earnings Call

April 28, 2026

Operator: Hello, and welcome to the Commvault Q4 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, just press star followed by 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. Now I would like to turn the call over to Michael Melnyk, Vice President of Investor Relations. Please go ahead, Mike.

Speaker #1: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, just press star followed by the number one on your telephone keypad.

Speaker #1: And if you would like to withdraw your question, press star one again. Thank you. Now I would like to turn the call over to Mike Melnyk, Vice President of Investor Relations.

Speaker #1: Please go ahead, Mike. Good morning and welcome to our earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about COMVAULT's future expectations, plans, and prospects.

Michael Melnyk: Good morning and welcome to our Earnings Conference Call. 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 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 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. All 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. Thank you again for joining us. Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay.

Speaker #1: All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and COMVAULT'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 these forward-looking statements.

Speaker #1: COMVAULT does not assume any obligation to update these statements. All COMVAULT'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.

Speaker #1: Thank you again for joining us. Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay? Good morning and thank you for joining us.

Sanjay Mirchandani: Good morning and thank you for joining us. We had a strong finish to the fiscal year, delivering results at or above our guided metrics while continuing to build momentum across the business. In Q4, subscription ARR increased 27% to $989 million. This was led by another quarter of strong growth from our SaaS business, which grew 42% to reach $400 million in ARR, a milestone for Commvault. Subscription revenue grew 20% to $208 million, and we generated a record free cash flow of $132 million in Q4, resulting in $237 million for the fiscal year. We're growing at scale while also generating strong profits and cash flow. We believe this combination reflects the health of the industry, the strength of our platform, and the durability of our model.

Speaker #1: We had a strong finish the fiscal year, delivering results at or above our guided metrics, while continuing to build momentum across the business. In the fourth quarter, subscription ARR increased 27% to 989 million.

Speaker #1: This was led by another quarter's strong growth from our SaaS business, which grew 42% to reach 400 million in ARR. A milestone for COMVAULT.

Speaker #1: Subscription revenue grew 20% to 208 million, and we generated a record free cash flow of 132 million in Q4, resulting in 237 million for the fiscal year.

Speaker #1: We're growing at scale, while also generating strong profits and cash flow. We believe this combination reflects the health of the industry, the strength of our platform, and the durability of our model.

Speaker #1: Now let me take a step back and talk about what's driving this momentum. In one word, it's data. Data is the lifeblood of every organization.

Sanjay Mirchandani: Now, let me take a step back and talk about what's driving this momentum. In one word, it is data. Data is the lifeblood of every organization. When it's down due to an outage, cyberattack, or human error, business comes to a halt. Organizations today are facing a variety of challenges with their data. First, data is scattered across environments, on-premise, at the edge, and in the cloud, expanding the attack surface for bad actors. Second, cyberattacks continue to grow in volume and sophistication. Adversaries are getting smarter and stronger. Compromise is almost certain. Third, identity has become one of the hottest new threat vectors. This is compounded by AI, as non-human identities outnumber human identities by 50 to 1. Commvault helps organizations address today's challenges by protecting, identifying, securing, and when needed, rapidly recovering their data. These challenges aren't static.

Speaker #1: When it's down due to an outage, cyber attack, or human error, business comes to a halt. Organizations today are facing a variety of challenges with their data.

Speaker #1: First, data is scattered across environments. On-premise, at the edge, and in the cloud. Expanding the attack surface for bad actors. Second, cyber attacks continue to grow in volume and sophistication, adversaries are getting smarter and stronger.

Speaker #1: Compromise is almost certain. Third, identity has become one of the hottest new threat factors. This is compounded by AI, as non-human identities outnumber human identities by 50 to 1.

Speaker #1: COMVAULT helps organizations address today's challenges by protecting, identifying, securing, and when needed, rapidly recovering their data. But these challenges aren't static. With the rise of AI, we're in the most important technology shifts in modern history.

Sanjay Mirchandani: With the rise of AI, we're in the most important technology shifts in modern history. AI creates more data, more access, and more risk, directly increasing demand for protection, governance, and trusted recovery. We see AI as a powerful tailwind for Commvault because it amplifies the importance of what we do. In an AI-driven world, if your data is compromised, your AI is compromised. Commvault provides the picks and shovels that empower customers to adopt AI securely and responsibly. We do this in a variety of ways. We protect the datasets used for AI and a broad spectrum of AI workloads. We help customers leverage AI to detect threats faster, recover at greater scale, and automate resilience operations. We help customers activate AI data securely for use with models and agents, and we bring governance to AI data.

Speaker #1: AI creates more data, more access, and more risk, directly increasing demand for protection, governance, and trusted recovery. We see AI as a powerful tailwind for COMVAULT because it amplifies the importance of what we do.

Speaker #1: In an AI-driven world, if your data is compromised, your AI is compromised. COMVAULT provides the picks and shovels that empower customers to adopt AI securely and responsibly, we do this in a variety of ways.

Speaker #1: We protect the data sets used for AI and a broad spectrum of AI workloads. We help customers leverage AI to detect threats faster, recover at greater scale, and automate resilience operations.

Speaker #1: We help customers activate AI data securely for use with models, and agents. And we bring governance to AI data. For example, with our Satori acquisition, now fully integrated into COMVAULT Cloud, customers can monitor and enforce agents' access to data.

Sanjay Mirchandani: For example, with our Satori Cyber acquisition now fully integrated into Commvault Cloud, customers can monitor and enforce agents' access to data. Additionally, as customers embrace and deploy AI, they're also focused on simplifying their technology stack. Enterprises don't want a patchwork of fragmented tools and products. They want the best unified platform to bring it all together, Commvault Cloud. Commvault Cloud unifies data protection, data security, identity resilience, and recovery all on one scalable control plane. Increasingly, more customers are standardizing on our platform, as evidenced by growth we see across the business. Let me shine a light on some of the major growth drivers for Commvault, which will extend into fiscal year 2027 and beyond. First, we continue to add new subscription customers to our platform. Second, we're expanding and driving multi-product adoption across our SaaS base.

Speaker #1: Additionally, as customers embrace and deploy AI, they're also focused on simplifying their technology stack. Enterprises don't want a patchwork of fragmented tools and products.

Speaker #1: They want the best unified platform to bring it all together: Commvault Cloud. Commvault Cloud unifies data protection, data security, identity resilience, and recovery, all on one scalable control plane.

Speaker #1: Increasingly, more customers are standardizing on our platform, as evidenced by growth we see across the business. Let me shine a light on some of the major growth drivers for COMVAULT, which will extend into fiscal year '27 and beyond.

Speaker #1: First, we continue to add new subscription customers to our platform. Second, we're expanding and driving multi-product adoption across our SaaS base. And third, we're seeing strong momentum with emerging revenue streams, including identity resilience.

Sanjay Mirchandani: Third, we're seeing strong momentum with emerging revenue streams, including identity resilience. Now I'll discuss each of these in more detail. First, we added over 2,500 subscription customers in fiscal year 2026. The growth-oriented investments we made over the past 2 years paid off. In the on-prem market, we're winning against other vendors while seeing customers return to Commvault after upstarts fail to live up to the hype. For example, in Q4, one of the world's top 50 law firms returned to Commvault because an upstart overpromised and underdelivered on products that were, quote, "on the roadmap and did not work." This customer is now leveraging our software and SaaS solutions, including a complete suite of data security, identity resilience, and recovery offerings. Second, we're making steady progress in driving multi-product adoption, a core pillar of our growth strategy.

Speaker #1: Now I'll discuss each of these in more detail. First, we added over 2,500 subscription customers in fiscal year '26. The growth-oriented investments we made over the past two years paid off.

Speaker #1: In the on-prem market, we're winning against other vendors, while seeing customers return to COMVAULT after upstarts fail to live up to the hype. For example, in Q4, one of the world's top 50 law firms returned to COMVAULT because an upstart overpromised and under-delivered on products that were "on the roadmap," and did not work.

Speaker #1: This customer is now leveraging our software and SaaS solutions, including a complete suite of data security, identity resilience, and recovery offerings. Second, we're making steady progress in driving multi-product adoption, a core pillar of our growth strategy.

Speaker #1: This is especially true in our SaaS business. The percentage of COMVAULT managed SaaS customers using more than one offering increased to 48%, a 500 basis point improvement from Q4 of last year.

Sanjay Mirchandani: This is especially true in our SaaS business. The percentage of Commvault managed SaaS customers using more than one offering increased to 48%, a 500 basis point improvement from Q4 of last year. For example, in Q4, we added a large virtual charter school that could not securely or efficiently manage its multi-cloud architecture with native hyperscaler tools. They chose Commvault to help manage their multi-cloud estate with the addition of Air Gap, Threat Scan, and Clean Room Recovery to meet their resiliency requirements. In fiscal year 2027, we're doubling down and incentivizing our sales force to build on this multi-product momentum. Third, in terms of monetizing new offerings, we're seeing healthy momentum as identity becomes a primary target for attackers. Our Active Directory, Entra ID, and Office solutions are landing new customers and expanding existing.

Speaker #1: For example, in Q4, we added a large virtual charter school that could not securely or efficiently manage its multi-cloud architecture with native hyperscaler tools.

Speaker #1: Nature's COMVAULT to help manage their multi-cloud estate with the addition of Airgap, Threat Scan, and Clean Room Recovery to meet the resiliency requirements. In fiscal year '27, we're doubling down and incentivizing our sales force to build on this multi-product momentum.

Speaker #1: Third, in terms of monetizing new offerings, we're seeing healthy momentum as identity becomes a primary target for attackers. Our Active Directory, Entra ID, and Okta Solutions are landing new customers and expanding existing.

Speaker #1: In Q4, Active Directory was once again one of our fastest-growing SaaS offerings. With AR more than doubling year over year. And collectively, our identity resilience and data security offerings represented 33% of net new AR in Q4.

Sanjay Mirchandani: In Q4, Active Directory was once again one of our fastest-growing SaaS offerings, with ARR more than doubling year over year. Collectively, our identity resilience and data security offerings represented 33% of net new ARR in Q4. For example, after a competitor suffered a crippling ransomware attack, a Fortune 500 retailer determined its resilience posture was too complex and costly. In Q4, they purchased Commvault's Active Directory Protection because it provided lower TCO and reduced recovery time from 2 days to under 90 minutes. As identity threats continue to evolve, this will continue to be an area of focus and innovation for us in fiscal year 2027. In closing, Commvault provides customers with a single unified platform that's essential for today's diverse data environments and tomorrow's AI-driven applications. Let me leave you with a few key takeaways. First, the market is getting bigger by the minute.

Speaker #1: For example, after a competitor suffered a crippling ransomware attack, a Fortune 500 retailer determined its resilience posture was too complex and costly. In Q4, they purchased COMVAULT's Active Directory protection because it provided lower TCO and reduced recovery time from two days to under 90 minutes.

Speaker #1: As identity threats continue to evolve, this will continue to be an area of focus and innovation for us in fiscal year '27. In closing, COMVAULT provides customers with a single unified platform that's essential for today's diverse data environments and tomorrow's AI-driven applications.

Speaker #1: Let me leave you with a few key takeaways. First, the market is getting bigger by the minute. AI is driving more data, more complexity, and more risk.

Sanjay Mirchandani: AI is driving more data, more complexity, and more risk, increasing the need for resilience. As data grows, so does Commvault. Second, Commvault Cloud is the differentiator. Customers are consolidating fragmented tools and standardizing on a single platform for data protection, data security, identity resilience, and recovery. Third, we're delivering durable, high-quality growth. We're scaling SaaS, expanding within our customer base, and doing so with improved margins and strong cash flow. That is why we believe we're well-positioned to win in the AI era. Now I'll turn it over to Gary Merrill, who's back as our CFO, to discuss our results and outlook. We welcome him and Geoff Haydon as our new President of Customer and Field Operations. Gary.

Speaker #1: Increasing the need for resilience. As data grows, so does Commvault. Second, Commvault Cloud is the differentiator. Customers are consolidating fragmented tools and standardizing on a single platform for data protection, data security, identity resilience, and recovery.

Speaker #1: And third, we're delivering durable, high-quality growth. We're scaling SaaS, expanding within our customer base, and doing so with improved margins and strong cash flow.

Speaker #1: That is why we believe we're well positioned to win in the AI era. And now I'll turn it over to Gary Merrill, who's back as our CFO to discuss our results and outlook.

Speaker #1: We welcome him and Jeff Hayden as our new president of customer and field operations. Gary, good morning. And thank you for joining us. For those who have not yet met, I serve as COMVAULT's CFO from 2022 through 2024 before moving into the chief commercial officer role.

Gary Merrill: Good morning, and thank you for joining us. For those who I've not yet met, I served as Commvault CFO from 2022 through 2024 before moving into the Chief Commercial Officer role. I'm excited to return as CFO, especially as we close fiscal year 2026 with strong momentum. I look forward to working with you as we continue to drive disciplined execution to capitalize on the growth opportunities ahead. Our Q4 results demonstrated accelerating SaaS growth, improved profitability, and record free cash flows. I will discuss our Q4 and fiscal year 2026 financial metrics using our existing reporting definitions. Additionally, please note that we will transition to the new financial reporting effective fiscal 2027 that I will discuss later in my prepared remarks. Turning to our fiscal Q4 results. I'll start by discussing ARR and free cash flow, which we believe are the North Star metrics.

Speaker #1: I'm excited to return as CFO, especially as we close fiscal year '26 with strong momentum. I look forward to working with you as we continue to drive disciplined execution to capitalize on the growth opportunities ahead.

Speaker #1: Our Q4 results demonstrated accelerating SaaS growth, improved profitability, and record free cash flows. I will discuss our Q4 in fiscal year 2026 financial metrics, using our existing reporting definitions.

Speaker #1: Additionally, please note that we will transition to the new financial reporting effective fiscal 2027 that I will discuss later in my prepared remarks. Turning to our fiscal Q4 results, I'll start by discussing ARR and free cash flow which we believe are the North Star metrics.

Speaker #1: We encourage you to evaluate these metrics on an annual basis. Which is aligned to how we plan and manage our business. In Q4, subscription ARR increased 27% to 989 million dollars.

Gary Merrill: We encourage you to evaluate these metrics on an annual basis, which is aligned to how we plan and manage our business. In Q4, subscription ARR increased 27% to $989 million. On a constant currency basis, using FX rates for 31 March 2025, we added $53 million of net new subscription ARR, our strongest performance of the fiscal year. Within subscription, our SaaS ARR hit a major milestone, growing 42% to $400 million, reflecting both new customer growth and healthy expansion from existing customers. We continue to make meaningful progress in multi-product adoption, a core pillar of our growth strategy. As Sanjay noted, 48% of Commvault Managed SaaS customers are using more than one product. This adoption is supported by a strong uptake of our identity resilience and data security solutions, which represented 33% of net new ARR.

Speaker #1: On a constant currency basis, using FX rates for March 31st, 2025, we added 53 million dollars of net new subscription ARR. Our strongest performance of the fiscal year.

Speaker #1: Within subscription, our SaaS ARR hit a major milestone growing 42% to 400 million dollars. Reflecting both new customer growth and healthy expansion from existing customers.

Speaker #1: We continue to make meaningful progress in multi-product adoption. A core pillar of our growth strategy. As Sanjay noted, 48% of COMVAULT managed SaaS customers are using more than one product.

Speaker #1: This adoption is supported by a strong uptake of our identity resilience, in data security solutions, which represented 33% of net new ARR. Our SaaS net dollar retention improved to 122%, highlighting our ability to expand within existing accounts.

Gary Merrill: Our SaaS net dollar retention improved to 122%, highlighting our ability to expand within existing accounts. Total ARR, which includes subscription ARR and the maintenance associated with perpetual licenses, increased 21% to $1.12 billion. On a constant currency basis, using FX rates as of 31 March 2025, we added $44 million of net new total ARR during fiscal Q4. Moving to free cash flows. Q4 rebounded to a record $132 million, reflecting strong collections aligned with focused working capital management. Full year fiscal 2026 free cash flows were $237 million, growing 16% year over year. In Q4, we accelerated our stock repurchases to 3 million shares for total consideration of $259 million, reflecting our confidence and focus on delivering long-term shareholder value.

Speaker #1: Total ARR, which includes subscription ARR and the maintenance associated with perpetual licenses, increased 21% to $1.12 billion. On a constant currency basis, using FX rates as of March 31, 2025, we added $44 million of net new total ARR during fiscal Q4.

Speaker #1: Moving to free cash flows, Q4 rebounded to a record 132 million dollars, reflecting strong collections aligned with focused working capital management. Full year fiscal 2026 free cash flows were 237 million dollars, growing 16% year over year.

Speaker #1: In Q4, we accelerated our stock repurchases to 3 million shares, for total consideration of 259 million dollars. Reflecting our confidence and focus on delivering long-term shareholder value.

Speaker #1: This brings total fiscal year 2026 repurchases to 446 million dollars. Representing over 4 million shares. Now, I'll discuss our income statement performance. Q4 total revenue increased 13% to 312 million dollars.

Gary Merrill: This brings total fiscal year 2026 repurchases to $446 million, representing over 4 million shares. Now I'll discuss our income statement performance. Q4 total revenue increased 13% to $312 million. Subscription revenue grew 20% to $208 million, led by a robust 43% growth in SaaS revenue to $93 million. Turn software license revenue grew 6% against a challenging comparison driven by strong renewals and existing customer business. We continue to see strength in large enterprise accounts with revenue from transactions over $100,000 increasing 9%, driven by higher deal volumes. Turning next to profitability. Q4 consolidated gross margin expanded 30 basis points sequentially to 81.8%. This reflects continued improvement in SaaS hosting margins driven by scale efficiencies and ongoing product optimization.

Speaker #1: Subscription revenue grew 20% to 208 million dollars. Led by a robust 43% growth in SaaS revenue to 93 million dollars. Current software license revenue grew 6% against a challenging comparison driven by stronger roles and existing customer business.

Speaker #1: We continue to see strength in large enterprise accounts with revenue from transactions over 100,000 dollars increasing 9% driven by higher deal volumes. Turning next to profitability.

Speaker #1: Q4 consolidated gross margin expanded 30 basis points sequentially to 81.8%. This reflects continued improvement in SaaS hosting margins, driven by scale efficiencies and ongoing product optimization.

Speaker #1: Q4 operating expenses increased 11% to 187 million dollars. Representing 60% of revenue. An improvement of 100 basis points year over year. This reflects benefits of our cost optimization program aimed to expand margins and allow for reinvestment in strategic growth initiatives.

Gary Merrill: Q4 operating expenses increased 11% to $187 million, representing 60% of revenue, an improvement of 100 basis points year over year. This reflects benefits of our pulse optimization program aimed to expand margins and allow for reinvestment in strategic growth initiatives. Non-GAAP EBIT in Q4 was $66 million, representing a non-GAAP EBIT margin of 21.3%. Looking ahead, we are entering fiscal year 2027 with strong momentum. With our subscription transformation largely complete, our financial priorities are to scale subscription ARR, expand margins, and increase free cash flow. Before reviewing our outlook for fiscal year 2027, I will briefly discuss three updates to our financial reporting that will be effective in fiscal Q1. These changes are outlined in our earnings press release and on slides 25 to 27 in our earnings presentation.

Speaker #1: Non-GAAP EBIT in Q4 was 66 million dollars. Representing a non-GAAP EBIT margin of 21.3%. Looking ahead, we're entering fiscal year 2027 with strong momentum.

Speaker #1: With our subscription transformation largely complete, our financial priorities are to scale subscription ARR, expand margins, and increase free cash flow. Before reviewing our outlook for fiscal year 2027, I will briefly discuss three updates to our financial reporting that will be effective in fiscal Q1.

Speaker #1: These changes are outlined in our earnings press release and on slides 25 to 27 in our earnings presentation. First, we have recast certain revenue and ARR classifications.

Gary Merrill: First, we have recast certain revenue and ARR classifications. The primary adjustment moves all term software-related support revenue into subscription revenue alongside term software licenses and SaaS revenue. Perpetual support revenue is now presented on its own line in our P&L, which directly correlates to our non-subscription-based revenue and ARR offerings. These recast changes are being made to, one, provide a consistent view of our offerings across subscription revenue and subscription ARR. Secondly, align financial reporting with our subscription-based business model. Finally, they reflect how we manage the business internally. There are no changes to total revenue or total ARR for any periods presented. Under the recast presentation for fiscal year 2026, subscription revenue was 82% of total revenue, and subscription ARR was 90% of total ARR.

Speaker #1: The primary adjustment moves all term software-related support revenue into subscription revenue alongside term software licenses and SaaS revenue. Perpetual support revenue is now presented on its own line in our P&L.

Speaker #1: Which directly correlates to our non-subscription-based revenue and ARR offerings. These recast changes are being made to, one, provide a consistent view of our offerings across subscription revenue and subscription ARR.

Speaker #1: Secondly, align financial reporting with our subscription-based business model. And finally, they reflect how we manage the business internally. There are no changes to total revenue or total ARR for any period presented.

Speaker #1: Under the recast presentation, for fiscal year 2026, subscription revenue was 82% of total revenue. And subscription ARR was 90% of total ARR. To assist with year-over-year comparability, of our new financial reporting effective in fiscal year 2027, we have provided a two-year quarterly lookback in our earnings press release and earnings presentation.

Gary Merrill: To assist with year-over-year comparability of our new financial reporting effective in fiscal year 2027, we have provided a two-year quarterly look-back in our earnings press release and earnings presentation, all recast amounts. For modeling purposes, an Excel download is also available on the investor relations website. The second change in our financial reporting is to streamline our KPI framework with emphasis on four key guided metrics, subscription ARR, free cash flow, subscription revenue, and non-GAAP EBIT. We will also provide supplemental total revenue and diluted share count guidance to assist with P&L modeling. Going forward, we will no longer disclose total ARR as the remaining perpetual maintenance stream will be less than 10% of our business. In addition, our subscription ARR guidance will no longer peg to the beginning of the fiscal year FX rate.

Speaker #1: All of all recast amounts. For modeling purposes, an Excel download is also available on the investor relations website. The second change in our financial reporting is to streamline our KPI framework with emphasis on four key guided metrics.

Speaker #1: Subscription ARR, free cash flow, subscription revenue, and non-GAAP EBIT. We will also provide supplemental total revenue and diluted share count guidance to assist with P&L modeling.

Speaker #1: Going forward, we will no longer disclose total ARR, as the remaining perpetual maintenance stream will be less than 10% of our business. In addition, our subscription ARR guidance will no longer peg to the beginning-of-the-fiscal-year FX rate.

Speaker #1: The final change to our fiscal year 2027 reporting will be a transition to subscription net dollar retention. Measured on an annualized basis. This includes both our term software and SaaS offerings and will align net dollar retention metrics with our subscription ARR and revenue disclosures.

Gary Merrill: The final change to our fiscal year 2027 reporting will be a transition to subscription net dollar retention measured on an annualized basis. This includes both our term software and SaaS offerings and will align net dollar retention metrics with our subscription ARR and revenue disclosures. For context, fiscal year 2026 subscription net dollar retention measured on an annualized basis was 114%. I'd like to reiterate that we will guide subscription ARR and free cash flow annually, which matches our business planning and management approach. Term software accounts for most of our ARR and upfront revenue, so quarterly results may fluctuate due to factors such as the mix between software and SaaS transactions, renewal timing, and shift in contract duration in any discrete quarter. Typically, these fluctuations even out over the fiscal year.

Speaker #1: For context, fiscal year 2026 subscription net dollar retention measured on an annualized basis was 114%. I'd like to reiterate that we will guide subscription ARR and free cash flow annually which matches our business planning and management approach.

Speaker #1: Term software accounts for most of our ARR and upfront revenue. So, quarterly results may fluctuate due to factors such as the mix between software and SaaS transactions.

Speaker #1: Renewal timing and shift in contract duration in any discrete quarter. Typically, these fluctuations even out over the fiscal year. Now, moving to our fiscal 2027 outlook using our new financial reporting.

Gary Merrill: Now, moving to our fiscal 2027 outlook using our new financial reporting. For fiscal Q1, we expect subscription revenue of $263 million to $265 million, representing approximately 15% year-over-year growth at the midpoint. This would result in approximately $310 million of total revenues. We also expect EBIT margins of approximately 19% and a diluted share count of approximately 42 million shares. For the full fiscal year 2027, we expect subscription ARR growth of 18% to 19% year over year, representing a range of $1.20 billion to $1.21 billion. Our subscription ARR growth percentage will continue to be led by our SaaS offerings, which we expect to exceed a half a billion dollars of ARR by the end of fiscal 2027.

Speaker #1: For fiscal Q1, we expect subscription revenue of $263 million to $265 million, representing approximately 15% year-over-year growth at the midpoint. This would result in approximately $310 million of total revenues.

Speaker #1: We also expect EBIT margins of approximately 19%. And a diluted share count of approximately 42 million shares. For the full fiscal year 2027, we expect subscription ARR growth of 18% to 19% year over year.

Speaker #1: Representing a range of 1.20 billion to 1.21 billion dollars. Our subscription ARR growth percentage will continue to be led by our SaaS offerings. Which we expect to exceed a half a billion dollars of ARR by the end of fiscal subscription revenue in the range of 1.115 billion to 1.125 billion dollars.

Gary Merrill: We expect subscription revenue in the range of $1.115 billion to $1.125 billion, representing approximately 15% year-over-year growth at the midpoint. As I mentioned earlier, we will also guide total revenue to assist with financial models. We expect total revenue of $1.30 billion to $1.31 billion. In addition, for fiscal 2027, we expect non-GAAP EBIT margins of 20.5%, free cash flows of $250 million to $260 million weighted towards the H2 of the fiscal year, and diluted share count of approximately 42 million shares. Finally, our board refreshed our share repurchase authorization for $250 million. We currently expect to allocate approximately 60% of annual free cash flow to share repurchases, subject to market conditions.

Speaker #1: Representing approximately 15% year over year growth at the midpoint. As I mentioned earlier, we will also guide total revenue to assist with financial models.

Speaker #1: We expect total revenue of 1.30 billion to 1.31 billion dollars. In addition, for fiscal 2027, we expect non-GAAP EBIT margins of 20.5%. Free cash flows of 250 to 260 million dollars.

Speaker #1: Weighted towards the second half of the fiscal year. And diluted share count of approximately 42 million shares. Finally, our board refreshed our share repurchase authorization for 250 million dollars.

Speaker #1: We currently expect to allocate approximately 60% of annual free cash flow to share repurchases, subject to market conditions. In closing, I'm excited to return to the CFO role and look forward to working with you as we continue to execute with discipline and capitalize on our growth opportunities ahead.

Gary Merrill: In closing, I'm excited to return to the CFO role and look forward to working with you as we continue to execute with discipline and capitalize on our growth opportunities ahead. We operate in a large and growing addressable market. There is meaningful potential to acquire new customers and expand with our installed base to increase multi-product adoption. I'm focused on executing those opportunities with a clear path to continued margin expansion and strong free cash flow generation while driving shareholder value. With that, I'll open the call for questions. Operator?

Speaker #1: We operate in a large and growing addressable market. There is meaningful potential to acquire new customers and expand with our installed base through increased multi-product adoption.

Speaker #1: I'm focused on executing those opportunities with a clear path to continued margin expansion and strong free cash flow generation while driving shareholder value. With that, I'll open the call for questions.

Speaker #1: Operator?

Speaker #2: We will now begin the question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad.

Operator: We will now begin the question-and-answer session. If you would like to ask a question at this time, simply press star followed by the number 1 on your telephone keypad. We will pause for a brief moment to compile the Q&A roster. Our first question comes from the line of Todd Weller with Stephens. Todd, please go ahead.

Speaker #2: We will pause for a brief moment to compile the Q&A roster. And our first question comes from the line of Todd Weller with Stephens.

Speaker #2: Todd, please go ahead.

Speaker #3: Thanks, good morning. And thanks for the question. You mentioned kind of the success with multi-product sales and changes in compensation could you walk us through at a high level your FY27 kind of sales comp structure and kind of what behaviors you're trying to drive differently versus FY26?

Todd Weller: Thanks. Good morning, and thanks for the question. You mentioned kind of the success with multi-product sales and changes in compensation. Could you walk us through, at a high level, your FY 2027 kind of sales comp structure and kind of what behaviors you're trying to drive differently versus FY 2026? Thanks.

Speaker #3: Thanks.

Speaker #4: Hi, Todd, it's Gary. Nice to meet you. I will take this. I'll hit the multi-product question that you were asking. But before I do that, I'll hit sales compensation first.

Gary Merrill: Hi, Todd. It's Gary. Nice to meet you. I will take this. I'll hit the multi-product question that you were asking. Before I do that, I'll hit sales compensation first. We don't disclose the discrete components of our compensation plan. What I can tell you is that our compensation plan for the field is geared towards 2 items specifically. The first is new customer acquisition, and the second is cross-sell, so platform expansion in our hybrid environment. They're the 2 key pillars of our compensation plan for FY 2027. As we look back to FY 2026, we're seeing great progress that we want to build off on multi-product expansion, especially with our customers that are now licensing at least 2 of our SaaS products.

Speaker #4: We don't disclose the discrete components of our compensation plan, but what I can tell you is that our compensation plan for the field is geared toward two items specifically.

Speaker #4: The first is new customer acquisition, and the second is cross-sell—so platform expansion in our hybrid environment. Those are the two key pillars of our compensation plan for FY27.

Gary Merrill: They're the 2 key pillars of our compensation plan for FY 2027. As we look back to FY 2026, we're seeing great progress that we want to build off on multi-product expansion, especially with our customers that are now licensing at least 2 of our SaaS products. That's now approaching 50% of our SaaS customers, and our ability to cross-sell and the opportunity to drive growth from cross-sell is a key pillar of our FY 2027 strategy.

Speaker #4: As we look back to FY26, we're seeing great progress that we want to build off of on multi-product expansion, especially with our customers that are now licensing at least two of our SaaS products.

Speaker #4: That's now approaching 50% of our SaaS customers. And our ability to cross-sell and the opportunity to drive growth from cross-sell is a key pillar of our FY27 strategy.

Gary Merrill: That's now approaching 50% of our SaaS customers, and our ability to cross-sell and the opportunity to drive growth from cross-sell is a key pillar of our FY 2027 strategy.

Speaker #3: Thank you.

Todd Weller: Thank you.

Speaker #2: And our next question comes from the line of Aaron Rikers with Wells Fargo. Aaron, please go ahead.

Operator: Our next question comes from the line of Aaron Rakers with Wells Fargo. Aaron, please go ahead.

Speaker #5: Yeah, thanks for taking the questions. I have two real quick. I guess maybe going back to late last year, I'm curious with your cloud unity platform, what you've been seeing in terms of customer engagements, customer interest, any kind of metrics you can share on those platforms?

Aaron Rakers: Yeah, thanks for taking the questions. I have two real quick. I guess, you know, maybe going back to late last year, I am curious, you know, with your Commvault Cloud Unity platform, what you have been seeing in terms of customer engagements, customer interest, any kind of metrics you can share on those platforms. Obviously, the Satori Cyber acquisition integration. Just curious, as we think about these multi-product platforms, you know, what you have seen in terms of, you know, the products introduced late last year.

Speaker #5: Obviously, the Satori acquisition integration. So just curious, as we think about these multi-product platforms, what you've seen in terms of the products introduced late last year.

Speaker #4: Yeah. Aaron, good to hear from you and good to talk to you again. When we think about what we announced at Unity, objective number one is to drive customer engagement.

Gary Merrill: Yeah. Aaron, good to hear from you and good to talk to you again. When we think about what we announced at Unity, objective number one is to drive customer engagement. To give the ability for our customers to leverage our platform now truly across any workload, whether it's on-premise or the cloud. Our primary measurement of that is really driving new subscription customer growth. Okay. We've added about 2,500 new subscription customers in the past 12 months. This quarter alone, it was roughly 600. How we start to monitor and measure that going forward will be across metrics of multi-product adoption as well as our ability to cross-sell. Not just up-sell, 'cause now we're starting to see the acceleration on the cross-sell motion as well.

Speaker #4: So to give the ability for our customers to leverage our platform now truly across any workload whether it's on-premise or the cloud. And our primary measurement of that is really driving new subscription customer growth.

Speaker #4: Okay? So we've added about 2,500 new subscription customers in the past 12 months. This quarter alone, it was roughly 600. And then how we start to monitor and measure that going forward will be across metrics of multi-product adoption as well as our ability to cross-sell.

Speaker #4: So not just upsell because now we're starting to see the acceleration on the cross-sell motion as well.

Speaker #3: Let me, Aaron, Sanjay here. Let me just add a little bit more to that. So the platform, if you remember, the Unity in the platform was about making sure we could give customers a singular capability to take data security, identity resilience, and data recovery as one unified offer.

Sanjay Mirchandani: Let me Aaron, Sanjay here. Let me just add a little bit more to that. The platform, if you remember, the Unity in the platform was about making sure we could give customers a singular capability to take data security, identity resilience, and data recovery as one unified offer, whether they deploy it in SaaS or they deploy it on-premise. You know, identity resilience and security, as an example, represented 33% of our net new ARR last quarter. We also added hundreds of Active Directory customers. Our ARR on Active Directory doubled year-on-year, and it's one of our fastest-growing offers in the history of the company. Without getting into absolute specifics, it gives you a sense that the design of Unity is exactly where customers are leaning in on.

Speaker #3: Whether they deploy it in SaaS or they deploy it on-premise. Just and identity resilience and security as an example, represent a 33% of our net new ARR last quarter.

Speaker #3: And we also added hundreds of active directory customers. Our ARR on active directory doubled year on year. And it's one of our fastest growing offers in the history of the company.

Speaker #3: So without getting into absolute specifics, it gives you a sense that the design of Unity is exactly where customers are leaning in on.

Speaker #5: Yeah. And then maybe as a quick follow-up, Gary, now that you're back in the CFO seat, I'm curious I know you gave guidance for the full year at 20.5% operating margin.

Aaron Rakers: Yeah. Then maybe as a quick follow-up, you know, Gary, now that you're back in the CFO seat, I'm curious, you know, I know you gave guidance for the full year at 20.5% operating margin. How do you think about the leverage that you see in this model? You know, is there any kind of thoughts of, you know, driving incremental operating margins? You know, could we see maybe mid-20% plus operating margin in the Commvault story as we look forward? Thank you.

Speaker #5: How do you think about the leverage that you see in this model? Is there any kind of thoughts of driving incremental operating margins, could we see maybe mid-20 plus percent operating margin in the compound story as we look forward?

Speaker #5: Thank you.

Speaker #4: Yeah, Aaron, thanks for the second follow-up question. First, guidance for FY27: 24.5%. Our belief when thinking about guidance is setting our guidance at the level that we believe in, that we're confident, that we contain.

Gary Merrill: Aaron, thanks for the second follow-up question. First, guidance for FY27, 20.5%. Our belief when thinking about guidance is setting our guidance at the level that we believe and that we're confident that we can tame. As we think about long term, especially as we scale our SaaS platform, there is leverage in this business model. AI from both an internal perspective and a customer perspective will give us great operating leverage opportunity. AI is driving data growth, it's driving efficiencies in our product, and it's driving efficiencies in how we talk to customers every single day. The short answer is yes. We're not at the point where I'm ready to give multi-year guidance, but a baseline of 20.5 is a good starting point, and we'd look to expand on that from there.

Speaker #4: As we think about long-term, especially as we scale, our SaaS platform, there is leverage in this business model. AI from both an internal perspective and a customer perspective will give us great operating leverage opportunity.

Speaker #4: AI is driving data growth. It's driving efficiencies in our product. And it's driving efficiencies in how we talk to customers every single day. So the short answer is yes.

Speaker #4: We're not at the point where I'm ready to give multi-year guidance. But at baseline of 20.5 is a good starting point. And we look to expand on that from there.

Speaker #5: Yeah. Thank you.

Aaron Rakers: Yeah. Thank you.

Speaker #4: Thanks, Aaron.

Gary Merrill: Thanks, Aaron.

Speaker #2: And our next question comes from the line of Michael Romanelli with Mizuho Securities. Michael, please go ahead.

Operator: Our next question comes from the line of Michael Romanelli with Mizuho Securities. Michael, please go ahead.

Speaker #6: Yeah. Hey, guys. Thanks for taking the questions. Just maybe on the 27 guide, can you walk through some of the top-line puts and takes for us?

Michael Romanelli: Yeah. Hey, guys. Thanks for taking the questions. just maybe on, you know, the 2027 guide. Can you walk through, you know, some of the top line puts and takes for us? You know, as part of that, you announced some, you know, recent leadership changes, obviously. You know, how did that factor into the thought process and logic around, setting guidance? I have a follow-up.

Speaker #6: And as part of that, you announced some recent leadership changes, obviously. How did that factor into the thought process and logic around setting guidance and the follow-up?

Speaker #7: This is Gary. I'll take the first part. If I zoom up and maybe go very at the macro level and as we thought about our plan for FY27, our objective is to build durable growth.

Gary Merrill: This is Gary. I'll take the first part. As we thought about our plan for FY27, our objective is to build durable growth, okay? The plan is built along the foundation of durable growth. There's three pieces that will help us drive those growth vectors. First is AI data growth. AI is driving massive amounts of data growth. That becomes a tailwind to our business. When you combine that with the complexity of hybrid environments, it makes what we do from a resiliency perspective, even more important. When you add the third vector of AI cyber-led attacks, which brings in the resiliency and security aspects, you have three growth vectors that build the foundation of the plan.

Speaker #7: Okay? So the plan is built along the foundation of durable growth. There's three pieces that will help us drive that growth vectors. First is AI data growth.

Speaker #7: So AI is driving massive amounts of data growth. That becomes a tailwind to our business. When you combine that with the complexity of hybrid environments, it makes what we do from a resiliency perspective even more important.

Speaker #7: And then, when you add the third vector of AI cyber-led attacks, which brings in the resiliency and security aspects, you have three growth vectors that build the foundation of the plan.

Gary Merrill: As we think about how we measure that success, you heard in my prepared remarks about our North Star metric of subscription ARR. That is the key way we will measure it. We're a hybrid business and we're expecting continued momentum in that business. As we serve our customers, whether they're on-premise or in the cloud, we expect acceleration to continue to come, especially from our SaaS business.

Speaker #7: As we think about how we measure that success, you heard in my prepared remarks about our North Star metric of subscription ARR. So that is the key way we will measure it.

Speaker #7: We're a hybrid business. And we're expecting continued momentum in that business. And as we serve our customers, whether they're on-premise or in the cloud, we expect acceleration to continue to come, especially from our SaaS business.

Speaker #3: Yeah. And I'll add a little bit on the leadership transition. So Gary, as Gary was our chief commercial officer, helped build the plan, was integrally involved with all aspects of both the guidance as well as where the revenue numbers were.

Sanjay Mirchandani: Yeah. I'll add a little bit on the, on the leadership transition. Gary Merrill, you know, as Gary Merrill was our Chief Commercial Officer, helped build the plan, was intricately involved with all aspects of both, the guidance as well as where the revenue numbers we were forecasting. Geoff Haydon was a board member, and on the inside was, you know, had full visibility as to what we were, what our assumptions were and how we were thinking all through the process. We were able to synchronize the leadership transition at the start of our fiscal year, at the, you know, and had both of them at our sales kickoff, which is very important from a handover point of view and consistency point of view.

Speaker #3: We were forecasting and then Jeff was a board member. And on the inside was had full visibility as to what we were what our assumptions were and how we were thinking all through the process.

Speaker #3: We were able to synchronize the leadership transition at the start of our fiscal year at the and had both of them at our sales kickoff, which is very important from a handover point of view and consistency point of view.

Sanjay Mirchandani: We were able to synchronize the leadership transition at the start of our fiscal year, at the, you know, and had both of them at our sales kickoff, which is very important from a handover point of view and consistency point of view. For all the important things like comp plans, territory planning, forecasting methodology, it was two in the box getting it done. You know, I feel very good actually about the timing and the leadership that we brought into the company to take us, you know, to 2027 and beyond.

Sanjay Mirchandani: For all the important things like comp plans, territory planning, forecasting methodology, it was two in the box getting it done. You know, I feel very good actually about the timing and the leadership that we brought into the company to take us, you know, to 2027 and beyond.

Speaker #3: And for all the important things like comp plans, territory planning, forecasting methodology, it was doing the box, getting it done. So I feel pretty good about I feel very good, actually, about the timing.

Speaker #3: And the leadership that we brought into the company to take us to 27 and beyond.

Michael Romanelli: Got it. Thanks. Super clear and helpful. Sanjay, you've laid out what is a pretty clear AI resilience vision and, you know, more recently unveiled Data Activate, AI Protect, and AI Studio. How are you just thinking about, you know, the commercial opportunity there as, you know, AI, a significant growth driver for you guys in fiscal 2027? Or, is the real monetization, you know, perhaps beyond that? Just, you know, would love to hear your thoughts on that. Thanks.

Speaker #5: Got it. Thanks. Super clear and helpful. Sanjay, you've laid out what is a pretty clear AI resilience vision and more recently unveiled data activate, AI protect, and AI studio.

Speaker #5: How are you just thinking about the commercial opportunity there as AI a significant growth driver for you guys in fiscal 27 or is the real monetization perhaps beyond that?

Speaker #5: Just would love to hear your thoughts on that. Thanks.

Sanjay Mirchandani: We're not, we're not pinpointing the exact number that, you know, we're attributing to AI because it's still early days, but it's definitely a tailwind. It's at, you know, to oversimplify it, we believe, and obviously a biased belief, that data is at the heart of AI and is driving AI models, is driving how customers use AI in the enterprise. What we're trying to do is make sure that we're giving them not only the products and the capabilities you mentioned, which are the latest, but doing what we've done for the better part of 30 years, which is protecting the components that build up the systems they use. So whether it's the vector databases, whether it's their deep S3 buckets that they're storing data in, you know.

Speaker #7: We're not pinpointing the exact number that we're attributing to AI because it's still early days. But it's definitely a tailwind. And it's to oversimplify it, we believe and obviously a biased belief that data is at the heart of AI.

Speaker #7: And is driving AI models, is driving how customers use AI in the enterprise. And what we're trying to do is make sure that we're giving them not only the products and the capabilities you mentioned, which are the latest, but doing what we've done for the better part of 30 years, which is protecting the components that build up the systems they use.

Speaker #7: So whether it's a vector databases, whether it's the deep S3 buckets that they're storing data in, whatever it may be, we're every day we're supporting more and more of the component feed that builds up the AI apps that they're building.

Sanjay Mirchandani: whatever it may be, we're every day we're supporting more and more of the componentry that builds up, you know, the AI apps that they're building. We'll continue to do that to give them all the availability. Plus, with the capabilities that we've just announced, we give them agentic access to our workflows. We give them as-agentic access to single policy engines. We're giving them, you know, everything they need to really protect their environments with the right guardrails and be able to recover as they roll out these fairly complex AI capabilities inside their enterprises. Early days for us in quantifying it, externally, but we, you know, we feel today, pretty good about the fact that it'll, you know, as long as the data keeps growing, which we think it does because of AI, what we do by way of resilience becomes front and center.

Speaker #7: And we'll continue to do that to give them all the availability. Plus, with the capabilities that we've just announced, we give them agentic access to our workflows.

Speaker #7: We give them agentic access to single policy engines. We're giving them everything they need to really protect their environments with the right guardrails and be able to recover as they roll out these fairly complex AI capabilities inside their enterprises.

Sanjay Mirchandani: Early days for us in quantifying it, externally, but we, you know, we feel today, pretty good about the fact that it'll, you know, as long as the data keeps growing, which we think it does because of AI, what we do by way of resilience becomes front and center.

Speaker #7: So early days for us in quantifying it externally, but we feel today pretty good about the fact that it'll as long as the data keeps growing, which we think it does, because of AI, what we do by way of resilience becomes front and center.

Operator: Our next question comes from the line of Eric Heath with KeyBanc. Eric, please go ahead.

Speaker #2: And our next question comes from the line—yep, our next question comes from the line of Eric Heath with KeyBank. Eric, please go ahead.

Operator: Our next question comes from the line of Eric Heath with KeyBanc. Eric, please go ahead.

Eric Heath: Great. Congrats on the results, gentlemen, and strong net new ARR acceleration. Gary, welcome back to the seat. Can you just talk about what you saw from a macro perspective, both in the quarter, given just some macro headwinds out there? Also memory is also an issue, so anything you could speak to about memory impact in the quarter. Gary, just coming back to some of the guidance philosophy and the assumptions there, but just any change in the philosophy we should be thinking about? I know you addressed some of it already, but just given the leadership changes, any additional prudence there? Similarly along your other question, any assumptions on macro or memory pricing that you're assuming in the guidance? Thank you.

Speaker #3: Great. Congrats on the results, gentlemen, and strong net new AR acceleration. And Gary, welcome back to the seat. So can you just talk about what you saw from a macro perspective, both in the quarter given just some macro headwinds out there, and also memories also an issue?

Speaker #3: So anything you could speak to about memory impact in the quarter, and then Gary, just coming back to some of the guidance philosophy and the assumptions there, but just any change in the philosophy we should be thinking about it?

Speaker #3: I know you addressed some of it already, but just given the leadership changes, any additional prudence there and similarly along the earlier question, any assumptions on macro or memory pricing that you're assuming the guidance?

Speaker #3: Thank you.

Gary Merrill: Yeah. Eric, thanks. Thanks, and good to hear from you. I'll hit it specifically. I'm gonna start with the last on the macro and the memory pricing. We kind of look at them as a combined. We're managing that in our pipeline. From an outlook perspective, the current trends are baked into our guidance. Now, we've been successful in being able to navigate that with our platform. We have 3 primary ways how we navigate supply chain or macro related to memory. First is we have a broad technical partnership with all of the major storage providers. We're able to leverage those partnerships, whether it's on supply or technical alignment as well. The depth and breadth of our platform integrations is a key competitive differentiator.

Speaker #7: Yeah. Eric, thanks. Thing good to hear from you. I'll hit it specifically. I'm going to start with the last on the macro and the memory pricing.

Speaker #7: We kind of look at them as a combined. We're managing that in our pipeline. And from an outlook perspective, the current trends are baked into our guidance.

Speaker #7: Now, we've been successful in being able to navigate that with our platform. We have three primary ways how we navigate supply chain or macro related to memory.

Speaker #7: First is we have a broad technical partnership with all of the major storage providers. So we're able to leverage those partnerships, whether it's on supply or technical alignment as well.

Speaker #7: So the depth and breadth of our platform integrations is a key competitive differentiator. Secondly, we work with our customers to I'll use the term sweat the assets.

Gary Merrill: Secondly, we work with our customers to, I'll use the term sweat the asset. Even if it's a, if it's a competitive takeout and it's a fresh install, working with our customers, we're able to leverage their existing infrastructure. Okay? The third, which we think is one of our best competitive abilities, is our SaaS platform. We have the ability from a workload perspective to migrate customers to our SaaS platform, and which is kind of where we see our ability to then manage these workloads regardless of what's happening in the broader economy. On your second question, which I believe is guidance philosophy, fundamentally, I've been a part of the leadership team now for many years. As we think about how we run the business day-to-day, nothing's changed, I would say, right?

Speaker #7: So even if it's a competitive takeout and it's a fresh install, we're working with our customers to be able to leverage their existing infrastructure. Okay?

Speaker #7: And the third, which we think is one of our best competitive abilities, is our SaaS platform. So we have the ability from a workload perspective to migrate customers to our SaaS platform.

Speaker #7: And which is kind of where we see our ability to then manage these workloads regardless of what's happening in the broader economy. On your second question, which I believe is guidance philosophy, fundamentally, I've been a part of the leadership team now for many years.

Gary Merrill: On your second question, which I believe is guidance philosophy, fundamentally, I've been a part of the leadership team now for many years. As we think about how we run the business day-to-day, nothing's changed, I would say, right? The collaboration between myself with Sanjay and now Geoff and the broader team is consistent regardless of what role that I was in. The way we think about guidance is taking a look at the market opportunity and then providing a number externally that we feel confident in.

Speaker #7: So as we think about how we run the business day to day, nothing's changed, I would say, right? The collaboration between myself, with Sanjay, and now Jeff in the broader team is consistent.

Gary Merrill: The collaboration between myself with Sanjay and now Geoff and the broader team is consistent regardless of what role that I was in. The way we think about guidance is taking a look at the market opportunity and then providing a number externally that we feel confident in.

Speaker #7: Regardless of what role that I was in. So the way we think about guidance is taking a look at the market opportunity, and then providing a number externally that we feel confident in.

Sanjay Mirchandani: I'll just say this, now that Gary signed and everything. Having a CFO who's been a CRO is one heck of an asset because you get a very pragmatic point of view on how to look at things. We're very happy with that.

Speaker #3: And I'll just say this. Now that Gary signed and everything, but having a CFO who's been a CRO is one heck of an asset because you get a very pragmatic point of view on how to look at things.

Speaker #3: So, we're very happy with that.

Eric Heath: Thank you, gentlemen.

Speaker #5: Thank you, gentlemen.

Operator: Now our next question comes from the line of Jason Ader with William Blair. Jason, please go ahead.

Speaker #2: And now our next question comes from the line of Jason Adder with William Blair. Jason, please go ahead.

Jason Ader: Yeah, thank you. Good morning. First, I want to just applaud you guys for the shift of the term support to the subscription line. It's something that I, you know, Mike, I've mentioned to you many times. I think that just cleans things up, and I think we all appreciate that. For Sanjay, you talked a little bit about, or I guess, Gary, you talked about the hardware pricing. I'm just wondering, has it actually impacted deals where some of your competitors are more tied to hardware, specific hardware, and therefore, it sort of shifted deals like that were late in process towards you because of the supply availability and your sort of hardware agnosticism?

Speaker #8: Yeah. Thank you. Good morning. First, I want to just applaud you guys for the shift of the term support to the subscription line. It's something that Mike, I've mentioned to you many times.

Speaker #8: So, I think that just cleans things up, and I think we all appreciate that. For Sanjay, you talked a little bit about—or I guess, Gary, you talked about—the hardware pricing.

Speaker #8: I'm just wondering, has it actually impacted deals where some of your competitors are more tied to hardware, specific hardware? And therefore, it's sort of shifted deals like that were late in process towards you because of the supply availability and your sort of hardware agnosticism?

Sanjay Mirchandani: Yeah, I'll take the first shot at it. You know, I will say this, we are probably at the place in our company's history where we have the strongest relationships with our technology partners. We work with them very closely on the pipeline. We work with them very closely on the customer requirements. You know, as much as availability and pricing does cause a little bit of, you know, revisits as part of the process, we've been so far, I'm gonna say, so far been able to manage the forecast pretty tightly in conjunction with our partners.

Speaker #3: Yeah, I'll take the first. I'll take the first shot at it. I will say this: we are probably at the place in our company's history where we have the strongest relationship with our technology partners.

Speaker #3: We work with them very closely on the pipeline. We work with them very closely on the customer requirements. And so, as much as availability and pricing does cause a little bit of revisits as part of the process, we've been—so far, I'm going to say so far—been able to manage the forecast pretty tightly in conjunction with our partners.

Sanjay Mirchandani: You know, one of the things, almost more importantly that we can do that Gary mentioned that holds us in good stead, is allowing customers, because of the way our platform is architected, to sweat the asset a little longer till they can get the right setup that they need and the timing that they want and the project get cost the way they require it. If they need the resilience we provide, in many cases, we've been able to go in and just sweat out the asset. Without getting super technical, we can also let them run the control plane in any way they want so that they could, you know, they're not beholden to a particular piece of hardware.

Speaker #3: And one of the things almost more importantly that we can do that Gary mentioned that holds us in a good stead is allowing customers because of the way our platform is architected, to sweat the asset a little longer.

Speaker #3: Still, they can get the right setup that they need and the timing that they want and the project get cost the way they required.

Speaker #3: But if they need the resilience we provide, in many cases, we've been able to go in and just sweat out the asset and without getting super technical, we can also let them run the control plane in any way they want so that they could they're not beholden to a particular piece of hardware.

Sanjay Mirchandani: Without getting super technical, we can also let them run the control plane in any way they want so that they could, you know, they're not beholden to a particular piece of hardware. We've got that flexibility in the architecture, and it's being used every single day as a hybrid company. Whether they're using the SaaS piece of it or they, you know, they're running it in the cloud, we're letting them work through this present sort of situation till it clears up.

Sanjay Mirchandani: We've got that flexibility in the architecture, and it's being used every single day as a hybrid company. Whether they're using the SaaS piece of it or they, you know, they're running it in the cloud, we're letting them work through this present sort of situation till it clears up.

Speaker #3: So we've got that flexibility in the architecture, and it's being used every single day as a hybrid company. So whether they're using the SaaS piece of it or they're running it in the cloud, we're letting them work through this present sort of situation till it clears up.

Gary Merrill: Jason, to go back to your first comment about the recap, I appreciate the call-out. One of the key priorities with that is aligning our P&L to the ARR. Now you can specifically see how the ARR momentum is translating into acceleration on the top line within the subscription. It's also important to give the clarity to our shareholders about the actual size now of the professional business, now that it's become nominal to the overall business.

Speaker #7: And Jason, to go back to your first comment about the recast, I appreciate the callout. One of the key priorities with that is aligning our P&L to there are.

Speaker #7: So now you can specifically see how the AR momentum is translating into acceleration on the top line within the subscription. And then it's also important to give the clarity to our shareholders about the actual size now of the professional business now that it's become nominal to the overall business.

Sanjay Mirchandani: That's fair.

Jason Ader: Great. Great. One follow-up on the comment, 33% of net new ARR coming from identity and data security. Can you just give us a quick report card, Sanjay, on some of the data security products? Like what's going well, where do you still feel like you've got some work? I know you have a handful of different products there, some acquisitions. Just it'd be great to get a quick report card.

Speaker #3: That's fair.

Speaker #8: Great. Great. And one follow-up. On the comment, the 33% new ARR coming from identity and data security, can you just give us a quick report card, Sanjay, on some of the data security products like what's going well, where do you still feel like you've got some work?

Speaker #8: I know you have a handful of different products there. Some acquisitions. It would be great to get a quick report card.

Sanjay Mirchandani: Yeah. You know, I think with Unity, we really upped the ante, if you would, on how our policy engine operates across the product. When you look at Satori and what it does with data security being integrated, you know, those capabilities, the SDM type capabilities are in the product, right in the product. If you look at Threat Scan, which has been something that has done really well for us, now it's been completely revamped and taken input from a variety of sources, including our own IP and third-party IP, to really give customers deep scanning capabilities to look at what happened.

Speaker #3: Yeah. I think with Unity, we really upped the ante, if you would, on how our policy engine operates across the product. So when you look at Satori, and what it does with data security being integrated, so those capabilities, the SBM-type capabilities are in the product, right, in the product.

Speaker #3: If you look at ThreatScan, which has been something that has done really, really well for us, now it's been completely revamped and taken inputs from a variety of sources, including our own IP and third-party IP to really give customers deep scanning capabilities to look at what happened.

Sanjay Mirchandani: You tie that back to Cleanroom, which we brought to market 2 years ago, and this generation of Cleanroom has tight integration with AGP and all the risk analysis that we can do to tell customers what happened, who touched it. When you fast-forward this to agentic capabilities, a lot of companies are fixated on, you know, rolling back an agent, which is fine. That is one threat vector in the overall scheme of things that needs to be looked at in sort of cohesion to bring back to really have resilience. That's where we're going. The numbers we shared sort of bode well for where customers' minds are and where, you know, how they're thinking about resilience because you have to look at it in an integrated way.

Speaker #3: You tie that back to Clean Room. Which we brought to market two years ago. And this generation of Clean Room has tight integration with AGP and all the risk analysis that we can do to tell customers what happened, who touched it.

Speaker #3: Now, when you fast forward this, to Agentic capabilities, a lot of companies are fixated on what rolling back an agent, which is fine. But that is one threat vector in the overall scheme of things that needs to be looked at in sort of cohesion to bring back to really have resilience.

Speaker #3: So that's where we're going. And the numbers we shared sort of bode well for where customers' minds are and where how they're thinking about resilience because you have to look at it in an integrated way.

Sanjay Mirchandani: Data security, identity resilience, and true single-click recovery on large platforms.

Speaker #3: Data security, identity resilience, and true single-click recovery on large platforms.

Jason Ader: Thank you.

Speaker #8: Thank you.

Operator: Our next question comes from the line of James Fish with Piper Sandler. James, please go ahead.

Speaker #2: And our next question comes from the line of James Fish with Piper Sadler. James, please go ahead.

James Fish: Hey, guys. Topic that's coming up, of course, is hardware and cloud. Maybe just to go back to that, are you seeing customers initially actually start with the on-prem for either a net new or a new deal completely, but then, you know, evaluate or turn to you guys to see what kind of cloud equivalent pricing would be just given the rising hardware costs? How are customers handling that sort of messaging? How are they handling that overall exposure to you? Is there a way to understand that penetration of cloud within subscription entirely at this point?

Speaker #3: Hey, guys. Topic that's coming up, of course, is hardware and cloud. Maybe just to go back to that, are you seeing customers initially actually start with the on-prem for either a net new or new deal completely, but then evaluate or turn to you guys to see what kind of cloud equivalent pricing would be just given the rising hardware costs?

Speaker #3: And how are customers handling that sort of messaging? How are they handling that overall exposure to you? And is there a way to understand that penetration of cloud within subscription entirely at this point?

Gary Merrill: James, Gary, I'll start on this. As it relates to thinking about navigation, what customers want is they want resilience at the end of the day. If you start with the macro theme of what we provide is resilience. When you get into, I'll say tier two, tier three apps, maybe not like the mission-critical tier one, the flexibility is there to think about the ability to be agnostic between whether they use on-premise infrastructure or they use cloud infrastructure, their own storage, or even our own cloud storage. That's kind of where we see it.

Speaker #7: So Jim and Gary, I'll start on this. So as it relates to thinking about navigation, so what customers want is they want resilience at the end of the day.

Speaker #7: So, if you start with the macro theme of what we provide, it is resilience. So, when you get into—I'll say—tier two, tier three apps, maybe not like the mission-critical tier one, the flexibility is there to think about the ability to be agnostic between whether they use on-premise infrastructure or they use cloud infrastructure of their own, storage, or even our own, our cloud storage.

Speaker #7: So that's kind of where we see it. And when you combine that with the flexibility with the hardware partners that we have as well as helping them sweat the assets, it becomes about the options that they have to make sure that we can keep their projects on track.

Gary Merrill: When you combine that with the flexibility with the hardware partners that we have, as well as helping them sweat the assets, it becomes about the options that they have to make sure that we can keep their projects on track. Now, to quantify, would I say that shift has been material to our SaaS business? Not yet. Okay, not yet. What it does is it keeps our project top of mind, and it allows us to continue to execute with a close plan.

Speaker #7: Now, to quantify what I say, that shift has been material to our SaaS business, not yet. Okay, not yet. But what it does, it keeps our project top of mind, and it allows us to continue to execute with a closed plan.

Sanjay Mirchandani: Yeah, because we're very unique in what we can deliver in that true hybrid capability, letting customers truly mix and match how they wish to deploy. Now, of course, it's a regulated industry. They have their own policy. There's a lot of things that come into play. We give them the very unique flexibility that nobody else has, can to do what they need to do. Over time, they can mix and match. Some do.

Speaker #3: Yeah, because we're very unique in what we can deliver in that true hybrid capability. Letting customers truly mix and match how they wish to deploy.

Speaker #3: Now, of course, it's a regulated industry. They have their own policy. There are a lot of things that come into play. But we give them—we give them very unique flexibility that nobody else has—to do what they need to do.

Speaker #3: And over time, they can mix and match. And some do.

James Fish: Okay. Yeah, Just to follow back up, I know I asked a long question there, but, what's the customer penetration of cloud within subscription entirely? Can you just remind us what optimizations on the product side are occurring and where cloud gross margins are now today? Thanks, guys.

Speaker #8: Okay. Yeah. Just to follow back up, I know I asked a long question there, but what's the customer penetration of cloud within subscription entirely?

Speaker #8: And can you just remind us what optimizations on the product side are occurring and where cloud gross margins are now today? Thanks, guys.

Sanjay Mirchandani: Take the first part. I'll take the second.

Speaker #3: Take the first part.

Gary Merrill: Yeah. Okay. Penetration of cloud. Cloud-native workloads. If you're thinking about workloads that are now running the cloud, whether there's databases, VMs, file and objects, even our Clumio, and we think about contribution, okay, to our growth, that bucket of our cloud digital native, cloud native offerings from Q3 to Q4 was our fastest growing segment that contributed to ARR. Which shows what the ability is to move and protect cloud applications with our cloud product. Major contributor, Jim, to our success sequentially. From a margin perspective, continued optimization. I don't have the margins in front of me, we can get them back to you. I would say sequential improvement on the margins, our North Star is driving well north of 70%.

Speaker #7: Okay, so penetration of cloud—so, cloud-native workload. If you're thinking about workloads that are now running in the cloud, whether that's databases, VMs, found objects, even our Plumio, and we think about contributions, okay, to our growth, that bucket of our cloud digital native, cloud-native offerings from Q3 to Q4 was our fastest growing segment that contributed to ARR.

Speaker #7: Okay. Which shows what the ability is to move and protect cloud applications with our cloud product. So major contributor Jim to our success sequentially.

Speaker #7: From a margin, from a margin perspective, continued optimization, I don't have the margins in front of me. But we can get them back to you.

Speaker #7: I would say sequential improvement on the margins. Our North Star is driving well north of 70% and we're on pace for that over the next couple of years.

Sanjay Mirchandani: We're on-

Gary Merrill: We're on pace for that over the next 2 years. That's where we're focused on is the product optimization and building that durable business of in the cloud.

Speaker #7: So that's where we're focused on is the product optimization. And building that durable business of in the cloud.

Michael Melnyk: And now-

Michael Melnyk: Mark?

Michael Melnyk: Our next question comes from the line of Param Singh with Oppenheimer. Param, please go ahead.

Operator: Our next question comes from the line of Param Singh with Oppenheimer. Param, please go ahead.

Speaker #2: And now our next question comes from the line of Param Singh. With Oppenheimer, Param, please go ahead.

Param Singh: Yeah, hi. Thank you so much for taking my question. Maybe, Sanjay, I wanted to understand the buying persona for identity resilience, is that more focused towards the CISO? Are you investing more in your security-focused sales teams, not just for identity resilience, but for some of the other workload opportunities, particularly around ransomware. Lastly, in that vein, are you also investing in R&D to fill some of the technical gaps on the ransomware side, or do you feel you have a robust portfolio to date? Thank you.

Speaker #5: Yeah, hi. Thank you so much for taking my question. Maybe Sanjay, I wanted to understand the buying persona for identity resilience. Is that more focused towards the CISO?

Speaker #5: And are you investing more in your security-focused sales teams? Not just for identity resilience, but for some of the other workload opportunities, particularly around ransomware.

Speaker #5: And then lastly, in that vein, are you also investing in R&D to fill some of the technical gaps on the ransomware side? Or do you feel you have a robust portfolio today?

Speaker #5: Thank you.

Sanjay Mirchandani: Hey, Param. I'll take the last part first. I think we've got a world-class platform when it comes to not just ransomware as a threat vector, but broader. Making sure that and I don't mean to say this in any way but serious, which is regardless of the threat vector or what causes the damage to the data, our focus is to be able to bring customers back to life, recover them. It's broader than ransomware. It definitely does ransomware, if that makes sense. Okay. It does it very well. Every day, we're helping customers with it.

Speaker #3: Hey, Param. I'll take the last part first. I think we've got a world-class platform when it comes to not just ransomware as a threat vector, but broader.

Speaker #3: And making sure that and I don't mean to say this in any way, but serious, which is regardless of the threat vector or what causes the damage to the data, our focus is to be able to bring customers back to life, recover them.

Speaker #3: So it's broader than ransomware, but it definitely does ransomware, if that makes sense. Okay. And it does it very well every day. We're helping customers with it.

Sanjay Mirchandani: On the first part of your question, on the buying persona for identity is quickly becoming because of AI, quickly becoming sort of a joint decision between the CISO organization and the classic CIO organization. Because in some cases, identity is managed by the IT organization, and now with AI applications being developed by teams or new teams sometimes, it's sort of going up in visibility. We're seeing both. We're seeing both. I'm not adding more security specialists, if you would. Over the past couple of years, a lot of the folks that have come into the company have come in from a security background.

Speaker #3: On the first part of your question, on the buying persona for identity—identity is quickly becoming, because of AI, sort of a joint decision between the CISO organization and the classic CIO organization.

Speaker #3: Because in some cases, identity is managed by the IT organization, and now with AI applications being developed by teams or new teams sometimes, it's sort of going up in visibility.

Speaker #3: So we're seeing both. We're seeing both. I'm not adding more security specialists, if you would, but over the past couple of years, a lot of the folks that have come into the company have come in from a security background.

Sanjay Mirchandani: In fact, Geoff Haydon, our president, also has a deep security background because today, you know, like I keep saying, data security, identity, and recovery are implicitly tied. We're cross-training our people. There's a lot of enablement we're doing to make sure that they can talk to the different personas, identify the right kind of conversations to have, and feel pretty good about the progress we've made. I mean, you know, it's rare that we'd lose a deal because we didn't have a security capability.

Speaker #3: In fact, Jeff Hayden, our president, also has a deep security background because today, like I keep saying, data security, identity, and recovery are implicitly tied.

Speaker #3: So we're cross-training our people. There's a lot of enablement we're doing to make sure that they can talk to the different personas, identify the right kind of conversations to have.

Speaker #3: And feel pretty good about the progress we've made. I mean, it's rare that we'd lose a deal because we didn't have a security capability.

Param Singh: Understood. Great. Thank you so much for that, Sanjay. As a follow-up, if I could, not to get into the memory side, I know you're managing the supply chain well, but a different question, right? The higher memory and component pricing does constrain budget dollars a little bit. Have you heard concern from customers where, you know, they're picking and choosing what workloads are mission-critical and more important to secure now and potentially pushing off certain workloads to the next year? Do you feel that the entire data estate is crucial enough today where dollars would primarily be spent on cyber resilience first and then something else? Any clarity there would be really appreciated.

Speaker #7: Understood. Great. Thank you so much for that, Sanjay. And as a follow-up, if I could—not to get into the memory side, I know you're managing the supply chain well—but a different question, right?

Speaker #7: The higher memory and component pricing does constrain budget dollars a little bit. Have you had concern from customers where they're picking and choosing what workloads are mission-critical and more important to secure now?

Speaker #7: And potentially pushing off certain workloads to the next year? Or do you feel that the entire data state is crucial enough today where dollars would primarily be spent on cyber resilience first, and then something else?

Speaker #7: Any clarity there would be really appreciated.

Sanjay Mirchandani: Yeah.

Param Singh: Thank you.

Sanjay Mirchandani: Param, I'll take a first shot at it. You know, anecdotally, customers are focused on resilience because you're only as good as the breadth of your coverage, okay? You know, your resilience capability increases with pretty much you have to protect everything that runs your business as mission-critical. For that, if customers are doing refreshes, they prioritize that in whatever architecture their industry allows them or their policies allow them to do. In some cases, it's not about pushing it off to next year. It's saying, I think we can run this through a SaaS capability. You know, we look at your SaaS, or we could have it hosted, and we'll write the data on premise.

Speaker #3: Yeah. Thank you. I'll take the first shot at it. The anecdotally, customers are focused on resilience because you're only as good as the breadth of your coverage.

Speaker #3: Okay. And resilience, your resilience capability increases with pretty much you have to protect everything that runs your business as mission-critical. For that, if customers are doing refreshes, they prioritize that in whatever architecture their industry allows them or their policies allow them to do.

Speaker #3: So, in some cases, it's not about pushing it off to next year. It's saying, I think we can run this through a SaaS capability.

Speaker #3: So we'll look at your SaaS, or we could have it hosted. And we'll write the data on-premise. So again, it comes back to the architecture, which we think gives customers the choices they need to be able to prioritize both the cost increases and the availability of memory and servers, etc.

Sanjay Mirchandani: Again, it comes back to the architecture, which we think gives customers the choices they need to be able to prioritize both the cost increases and the availability of memory and servers, et cetera. It comes back to that. There's no single answer. Yes, you know, obviously, if things are in scarce supply or are more expensive, people do prioritize, and we're right there with them to help them through that.

Speaker #3: So it comes back to that. There's no single answer, but yes, obviously, if things are in scarce supply or are more expensive, people do prioritize.

Speaker #3: And we're right there with them to help them through that.

Param Singh: Perfect. Thank you so much for that. Appreciate it, Sanjay.

Speaker #7: Perfect. Thank you so much for that. Appreciate it, Sanjay.

Sanjay Mirchandani: Thanks, Param.

Speaker #3: Thanks, Param.

Operator: Our next question comes from the line of Yun Kim with Loup Capital Markets. Yun, please go ahead.

Speaker #2: And our next question comes from the line of Yoon Kim with Loop Capital Markets. Yoon, please go ahead.

Yun Kim: All right, great. Thank you. Congrats on a strong finish to the year. If you can update us on the overall partner ecosystem that you're expanding, especially around cloud service providers. I think you had some announcements on that recently, with Google and whatnot. How important is that, securing that close relationship with the three major hyperscalers in your go-to-market, especially around cyber resiliency, and then especially with much of the agentic AI framework, running on those hyperscaler platforms?

Speaker #8: All right. Great. Thank you. Congrats on a strong finish to the year. If you can update us on the overall partner ecosystem that you're expanding, especially around cloud service providers, I think you had some announcements on that recently with Google and whatnot.

Speaker #8: How important is it to secure that close relationship with the three major hyperscalers in your go-to-market? Especially around cyber resiliency, and then especially with much of the agentic AI framework running on those hyperscaler platforms.

Sanjay Mirchandani: Hi, Yun, it's Sanjay. I'll try and address that. Our relationships with the hyperscalers are pivotal. It's very important as customers truly embark upon not just hybrid cloud, but multi-cloud deployments, our ability to protect customers with a single platform across multiple clouds and on-premise capabilities is unique. Our hyperscaler relationships are something that we invest deeply in, okay? Both from an engineering point of view and a go-to-market point of view. Access. If a customer wants to purchase off of a marketplace, we have deep integrations into all the marketplaces. We continue to evolve the platform as customers make choices around agentic, to your point.

Speaker #3: Hi, Yoon. It's Sanjay. I'll try and address that. So our relationships with the hyperscalers are pivotal. It's very important as customers truly embark upon not just hybrid cloud, but multi-cloud deployments.

Speaker #3: Our ability to protect customers with a single platform across multiple clouds and on-premise capabilities is unique. So, our hyperscaler relationships are something that we invest deeply in.

Speaker #3: Okay. Both from an engineering point of view and a go-to-market point of view. So, access. If a customer wants to purchase off of a marketplace, we have deep integrations into all the marketplaces.

Speaker #3: And then we continue to evolve the platform as customers make choices around agentic, to your point, whether it's the whether it's the vector databases, whether it's the agentic frameworks that they have, identity systems that they use.

Sanjay Mirchandani: Whether it's the, you know, whether it's the vector databases, whether it's the agentic frameworks that they have, identity systems that they use, we're continuing to build out our resilience capabilities on that so that, you know, when the customer makes that choice, we're right there with them, okay? We've done that for years, and that's always held us in good stead, so we continue to do that. What was the other part of your question? Cyber resilience. Yeah. What we do, for example, that makes us, again, very unique from a resilience point of view is customers can write their data into our Air Gap immutable capability on any of the four major hyperscalers today. So they can mix and match as they need to.

Speaker #3: We're continuing to build out our resilience capabilities on that so that when the customer makes that choice, we're right there with them. Okay. And we've done that for years.

Speaker #3: And that's always held us in good step. So we continue to do that. What was the other part of your question? Cyber resilience. Yeah.

Speaker #3: And what we do, for example, that makes us, again, very unique from a resilience point of view, is customers can write their data into our air-gapped, immutable capabilities on any of the four major hyperscalers today.

Speaker #3: So they can mix and match as they need to. And for whatever—economic reasons, commercial reasons, resilience reasons, redundancy reasons—we allow them, through the same control plane, very seamlessly, to be able to protect their data and their capabilities on any of the hyperscalers.

Sanjay Mirchandani: For whatever, for economic reasons, commercial reasons, resilience reasons, redundancy reasons, we allow them through the same control plane very seamlessly to be able to protect their data and their capabilities on any of the hyperscalers. You know, the abstraction is what we bring. TCO is what we bring. As you mentioned, Google, our Commvault Cloud platform, you know, supports Google. Our Clumio capability, our Clumio platform, which is designed for cloud natives, which has thus far been an Amazon AWS sort of protection, has now expanded into Google. Google Cloud is also supported by Clumio, which is quite the favorite with the cloud natives.

Speaker #3: So the abstraction is what we bring. TCO is what we bring. And you mentioned Google. Our COMVAULT Cloud Platform supports Google, but our CLUMIO capability, our CLUMIO platform, which is designed for cloud natives, which has thus far been an Amazon AWS sort of protection, has now expanded into Google.

Speaker #3: So Google Cloud is also supported by CLUMIO, which is very which is quite the favorite with the cloud natives.

Yun Kim: Okay, great. Thanks for that, Sanjay. Gary, in regard to, probably a question that you probably wanted to avoid so far, but in regard to seasonality of your SaaS business for in your outlook, is there any big renewal quarter when, where you're expecting a certain SaaS upsell or even a conversion of term license to SaaS?

Speaker #8: Okay. Great. Thanks for that, Sanjay. Gary, in regard to probably a question that you probably wanted to avoid so far, but in regard to seasonality of your SaaS business for in your outlook, is there any big renewal quarter when you're expecting a certain SaaS upsell or even a conversion of term license to SaaS?

Gary Merrill: Yeah. Thanks. I'll hit it. The average contract length of our SaaS deals is 1 to 2 years. We're in that midpoint of 1 to 2 years. What that means is, as you see our SaaS ARR accelerate and grow every quarter, that means that our renewal base is growing every single quarter as well. What happens is, and what you'll see is some of the acceleration in the H2 of fiscal year 2026, is that as our renewal population grows, it's a natural opportunity for that cross-sell opportunity that you see, and that's coming through in some of our prepared remarks. We expect that trend to continue with our typical seasonality.

Speaker #7: Yeah. Thanks, Yoon. I'll hit it. The average contract length of our SaaS deals is one to two years. So we're in that midpoint of one to two years.

Speaker #7: So what that means is, as you see our SaaS ARR accelerate and grow every quarter, that means that our renewal base is growing every single quarter as well.

Speaker #7: So what happens is, and what you'll see is some of the acceleration in the second half of fiscal year '26 is that as our renewal population grows, it's a natural opportunity for that cross-sell opportunity that you see, and that's coming through in some of our prepared remarks.

Speaker #7: So we expect that trend to continue. With our typical seasonality, so as we build out and think about renewals in the second half of fiscal year 27, the opportunity will even be that much bigger on incremental cross-sell as well.

Gary Merrill: As we build out and think about renewals in H2 of fiscal year 2027, the opportunity will even be that much bigger on incremental cross-sell as well.

Yun Kim: Okay, great. Thanks for that answer. Thank you.

Speaker #8: Okay. Great. Thanks for that answer. Thank you.

Michael Melnyk: Michael Melnyk, take the next question.

Operator: Absolutely. Our next question comes from the line of Howard Ma with Guggenheim Securities. Howard, please go ahead.

Speaker #7: Mark, I'll take the next question.

Operator: Absolutely. Our next question comes from the line of Howard Ma with Guggenheim Securities. Howard, please go ahead.

Speaker #2: Mark, question comes from the absolutely. Our next question comes from the line of Howard Ma with Guggenheim Securities. Howard, please go ahead.

Howard Ma: Hey, thanks. I'll keep it short. And Gary, welcome back to the seat. My question is, are there any trends to call out in terms of new and renewal procurement decisions? What I'm really getting at is how comfortable are you in the initial subscription revenue and margin guide? Did you appropriately bake in? I kind of think there's three things. There's higher memory prices, there's cloud modernizations that are happening broadly, and then there's the potential impact of Commvault Cloud Unity on shorter contract duration. Did you appropriately bake in potential contract duration compression? Thank you.

Speaker #3: Hey, thanks. I'll keep it short. And Gary, welcome back to the seat. My question is, are there any trends to call out in terms of new and renewal procurement decisions?

Speaker #3: And what I'm really getting at is, how comfortable are you in the initial subscription revenue and margin guide? Did you appropriately bake in—I kind of think there's three things.

Speaker #3: There are higher memory prices. There's cloud modernization happening broadly, and then there's the potential impact of Commvault Cloud, Unity, on shorter contract durations.

Speaker #3: So did you appropriately bake in potential contract duration compression? Thank you.

Gary Merrill: Howard, good to talk to you again. I'm glad to be back working with you. A couple different pieces there. You look at the renewal pool, I would say on the software side in FY 2027 relative to FY 2026, it's roughly the same or slightly bigger, but not significant. We have factored in our expectations on renewal term, like term length. What we saw in from fiscal Q3 to Q4 is roughly no change to term length, but we've modeled that out now in FY 2027. I think if I think about the way we've built the guidance around subscription ARR, we expect the vast majority of subscription ARR driven from our SaaS business. Okay. Similar to the trend that you saw for FY 2026. Therefore, we'll continue to see acceleration in the SaaS business.

Speaker #7: Howard, good to talk to you again. I'm glad to be back working with you. A couple of different pieces there. If you look at the renewal pool, I would say on the software side, NFY 27 relative to FY 26, it's roughly the same or slightly bigger.

Speaker #7: But not significant. And so we have factored in our expectations on renewal term, like term length. What we saw from fiscal Q3 to 4 is roughly no change to term length.

Speaker #7: But we've modeled that out now into FY 27. I think if I think about the way we've built the guidance around subscription ARR, we expect the vast majority of subscription ARR to be driven from our SaaS business.

Gary Merrill: I think if I think about the way we've built the guidance around subscription ARR, we expect the vast majority of subscription ARR driven from our SaaS business. Okay. Similar to the trend that you saw for FY 2026. Therefore, we'll continue to see acceleration in the SaaS business. Our software business and our hybrid environment is a roughly ± similar renewal pool. Then the difference will be what we expect to take from the new local acquisition on-premise.

Speaker #7: Okay. Similar to the trend that you saw for FY26. So, therefore, we'll continue to see acceleration in the SaaS business. Our software business and our hybrid environment is a roughly, plus or minus, similar renewal pool.

Gary Merrill: Our software business and our hybrid environment is a roughly ± similar renewal pool. Then the difference will be what we expect to take from the new local acquisition on-premise.

Speaker #7: And then the difference will be what we expect to take from the new logo acquisition on-premise.

Howard Ma: Okay. Thank you, Gary.

Speaker #3: Okay. Thank you, Gary.

Operator: Our next question comes from the line of-

Speaker #2: And our next question comes from the line of our next question comes from the line of Rudy Kessinger with the Davidson. Rudy, please go ahead.

Sanjay Mirchandani: Marco.

Operator: Our next question comes from the line of Rudy Kessinger with D.A. Davidson. Rudy, please go ahead.

Rudy Kessinger: Great. Thanks for taking my question. Gary, certainly looking forward to working closer with you again, going forward. Gary, you said in response to a question on memory earlier, you know, one of the three reasons you are able to navigate this is the ability to maybe cover some of those workloads from the cloud. I just want to clarify that with respect to how much of a driver of your SaaS net new ARR in fiscal Q4 was from customers, you know, protecting on-premise workloads via your SaaS offering, as opposed to, you know, purchasing new hardware. Is that a material driver, and do you expect that to be a material driver of SaaS net new ARR going forward this year, just given the memory price increases?

Speaker #7: Great. Thanks for taking my question. And Gary, certainly looking forward to working closer with you again going forward. Gary, you said in response to a question on memory earlier, one of the three reasons you're able to navigate this is the ability to maybe cover some of those workloads from the cloud.

Speaker #7: And I just want to clarify that, with respect to how much of a driver of your SaaS and net new ARR in fiscal Q4 was from customers protecting on-premise workloads via your SaaS offering, as opposed to purchasing new hardware.

Speaker #7: Was that a material driver? And do you expect that to be a material driver of SaaS net ARR going forward this year, just given the memory price increases?

Gary Merrill: Hey, Rudy. Nice to talk to you again as well. Not significant in Q4. What it does, it gives us the ability to make sure that our project with the customer to help meet the resiliency need stays on track, to give them that option if they need to go that way in the future, that they've scoped out the technical considerations. Not a significant contributor Q4. Acceleration, that is not factored into my guide for FY27 either. My guidance related to FY27, exceeding 500 million of SaaS ARR, would exclude any significant impact from that.

Speaker #3: Hey, Rudy. Nice to talk to you again as well. Not significant in Q4. What it does, it gives us the ability to make sure that our project with the customer, to help meet the resiliency needs, stays on track.

Speaker #3: To give them that option, if they need to go that way in the future, they've scoped out the technical considerations. So, not a significant contributor to Q4; acceleration, that is not factored into my guide.

Speaker #3: For FY '27 either. My guidance related to FY '27, exceeding $500 million, would exclude any significant impact from that.

Rudy Kessinger: Okay. Super helpful. That's it for me. Thanks again.

Speaker #7: Okay. Super helpful. That's it for me. Thanks again.

Sanjay Mirchandani: Thank you.

Speaker #3: Thank you.

Operator: Our next question comes from the line of Joseph Gallo with Jefferies. Joseph, please go ahead.

Speaker #2: Our next question comes from the line of Joseph Galio, with Jefferies. Joseph, please go ahead.

Joseph Gallo: Hey, guys. Thanks for the question. Your subscription ARR was really impressive at $114. Just given the broadening portfolio, how should we think about how that trends in fiscal 2027 versus your sub ARR guide of 18.5%?

Speaker #9: Hey, guys. Thanks for the question. Your subscription ARR was really impressive at $114 million. Just given the broadening portfolio, how should we think about how that trends in fiscal '27 versus your sub-ARR guide of 18.5%?

Gary Merrill: It's Gary. Hey, Joseph. Nice to meet you, and thanks for asking the question. Yeah, one of the recast items that I made thinking about going into FY 2027 is focusing on that subscription NRR as a key metric 'cause yes, you're right, it aligns to both our revenue on subscription and the ARR. We're not modeling significant upside in that number in the guidance. In the guidance, generally reflects that steady state. That keeps our SaaS NRR very healthy and gives us opportunity to improve also on the software piece as well.

Speaker #7: It's Gary. Hey, Joseph. Nice to meet you. And thanks for asking the question. Yeah. So one of the recast items that I made thinking about going into FY 27 is focusing on that subscription ARR.

Speaker #7: As a key metric—because, as you're right, it aligns to both our revenue on subscription and the ARR. We're not modeling significant upside in that number in the guidance.

Speaker #7: So in the guidance, it generally reflects that steady state. And that keeps our SaaS ARR very healthy, and gives us opportunity to improve also on the software piece as well.

Joseph Gallo: Awesome. Thanks. Just as a quick follow-up, I mean, it was great to hear the potential competitive differentiation with higher memory prices versus other vendors. I'm just curious, broadly, have you seen any changes in the pricing environment competitively?

Speaker #9: Awesome. Thanks. And just as a quick follow-up, I mean, it was great to hear the potential competitive differentiation with higher memory prices versus other vendors.

Speaker #9: I'm just curious, broadly, have you seen any changes in the pricing environment competitively?

Gary Merrill: No significant. If I look at discounting trends that we had during the quarter, they were consistent with the last couple quarters. It is a competitive market, obviously, as you guys do your research, but we are not seeing any incremental pricing pressure. It is more, I think as Sanjay outlined, and you even emphasized, it is navigating those cost challenges relative to the resilience budget and making sure that resilience budget is maintained as a priority versus traded off as just storage costs.

Speaker #7: No, significant. If I look at discounting trends that we had during the quarter, they were consistent with the last couple of quarters. It is a competitive market, obviously, as you guys do your research.

Speaker #7: But we're not seeing any incremental pricing pressure. It's more I think as Sanjay outlined and you even emphasized, it's navigating those cost challenges relative to the resilience budget.

Speaker #7: And making sure that resilience budget is maintained as a priority versus traded off as just storage costs.

Joseph Gallo: Awesome. Thank you.

Speaker #9: Awesome. Thank you.

Operator: Our next question comes from the line of Shrenik Kothari with Baird. Shrenik, please go ahead.

Speaker #2: Our next question comes from the line of Shranik Kothari with Baird. Shranik, please go ahead.

Shrenik Kothari: Yeah, thanks a lot. Again, welcome back, Gary. Sanjay, just in relation to overall outlook and guide, I know you in prior calls you have talked about AI as a big growth driver, but it was mostly as proofs of concept within your customers. It seems now you're pushing harder. AI is driving more data, more risk. You mentioned the market is getting bigger by the minute. Just which of the use cases that you are most excited about and you're seeing real enterprise budget pull today compared to sort of what you talked earlier? If you can sort of elaborate more across protecting AI data sets versus model flows as the recovery of agent-run workloads, also governing data access and cloud-native recovery. Just any thoughts there? I had a quick follow-up.

Speaker #5: Yeah. Thanks a lot. Again, welcome back, Gary. Sanjay, just in relation to overall outlook and guide, I know in prior calls, you have talked about AI as a big growth driver, but it was mostly as proofs of of concept.

Speaker #5: Within your customers, it seems now you're pushing harder, AI is driving more data, more risk. You mentioned the market is getting bigger by the minute.

Speaker #5: Just, which of the use cases are you most excited about and where are you seeing real enterprise budget pull today, compared to what you've talked about earlier? If you could elaborate more across protecting AI datasets versus model flows, as well as the recovery of agent-driven workloads, and also governing data access and cloud-native recovery?

Speaker #5: Just any thoughts there and had a quick follow-up.

Sanjay Mirchandani: Sure, sure. Shrenik, you know where I'd say in the enterprise-grade applications, we're in the early days. There's a lot of trials, there's a lot of models being used. What we're doing is getting back to, like I said in an earlier response, is making sure that we can broadly protect the componentry that customers will use, are using or will use to build these apps. The databases, the vector databases where the data is stored, exposing that data so they can use it in pipelines. The newer products we have. Giving them agentic capabilities to quickly get resilience built day zero into the apps as opposed to an afterthought.

Speaker #9: Sure, sure. Shranik, so I'd say in the enterprise—enterprise-grade applications—we're in the early days. There's a lot of trials, there's a lot of models being used.

Speaker #9: So what we're doing is getting back to, like I said, in an earlier response, is making sure that we can broadly protect the componentry that customers will use.

Speaker #9: Are using or will use to build these apps. So the databases, the vector databases, where the data is stored, exposing that data so they can use it in pipelines.

Speaker #9: So the newer products we have. Giving them agentic capabilities to quickly get resilience built day zero into the apps. As opposed to an afterthought.

Sanjay Mirchandani: What we believe is critical in this new sort of new types of apps, AI-enabled apps that are being built is that protection and resilience needs to be active, not passive. It needs to be on the front end of as you build the app, as opposed to in the back end of when you've got the app. You know, you mentioned many things. You know, it's like, is it risk? Is it data? Is it recovery policy? You know, cloud native? All of it. All of it. We're helping them through the process. Again, our focus is data and recovering the data regardless of what the, you know, what may have touched it. Agentic, non-agentic, human, non-human, you know, all of that.

Speaker #9: Because what we believe is critical in this new sort of new types of apps, AI-enabled apps that have been built is that protection and resilience needs to be active, not passive.

Speaker #9: It needs to be on the front end of as you build the app, as opposed to in the back end of when you've got the app.

Speaker #9: So you mentioned many things. It's like, is it risk? Is it data? Is it recovery policy? Cloud-native? All of it. All of it. So we're helping them through the process.

Speaker #9: But again, our focus is data. And recovering the data regardless of what may have touched it. Agentic, non-agentic, human-non-human. All of that. So it's early days.

Sanjay Mirchandani: It's early days, it's a journey, but our goal is to be able to give customers through Commvault Cloud a single-click recovery of the entire AI stack. That's where we're driving to.

Speaker #9: It's a journey. But our goal is to be able to give customers through COMVAULT CLOUD a single-click recovery of the entire AI stack. That's where we're driving to.

Shrenik Kothari: Great. Very helpful. Thanks a lot, Sanjay. Just very, very quickly, again, Gary, in relation to guide, I know you did mention there's field comps are geared for the next year towards both new logos as well as cross-sell platform. Just, it sounds great, right? Especially given the stronger identity and multi-product momentum. Just how different is this in practice from fiscal 2026 in terms of how you are sort of fine-tuned their incentives, any success metrics around AI identity? Just anything that you can provide there in granularity.

Speaker #5: Great. Very helpful. Thanks a lot, Sanjay. Just very quickly, again, Gary, in relation to guide, I know you did mention there's field comps are geared for the next year towards both new logos as well as cross-sell platform.

Speaker #5: Just it sounds great, right? Especially given the stronger identity and multi-product momentum. But just how different is this in practice from fiscal 26 in terms of how we are sort of fine-tuned that incentives, any success metrics around AI, identity?

Speaker #5: Just anything that you can provide there in granularity.

Gary Merrill: Yes. I can summarize this for you. The comp plan design for our field teams for FY 2027 is roughly consistent with 2026. What we do is tweak the cross-sell incentives on the products that we believe have the greatest opportunity for growth and that obviously our customers need to stay resilient. It's, it's a, it's a tweak in the where we point them as it relates to the specific product, but new logo acquisition has always been a fundamental pillar of our, of our comp plan.

Speaker #7: Yes. I can summarize this for you. So the comp plane designed for a field team for FY 27 is roughly consistent with 26. So what we do is tweak the cross-sell incentives on the products that we believe have the greatest opportunity for growth.

Speaker #7: And obviously, our customers need to stay resilient. So it's a tweak in where we point them as it relates to the specific product.

Speaker #7: But new logo acquisition has always been a fundamental pillar of our comp plane.

Shrenik Kothari: All right. Well, thanks a lot.

Speaker #5: Got it. Thanks a lot.

Operator: Our next question comes from the line of Junaid Siddiqui with Truist. Junaid, please go ahead.

Speaker #2: Our next question comes from the line of Junaid Siddiqui with Travis. Junaid, please go ahead.

Junaid Siddiqui: Great. Thank you. Good morning. Sanjay, as frontier AI models become increasingly embedded across cybersecurity workflows and as these model providers themselves potentially push further into security, how do you see Commvault's role evolving to remain core to cyber resilience? How are you partnering with these platforms to protect customers in a more agentic world?

Speaker #10: Great. Thank you. Good morning. Sanjay has Frontier AI models become increasingly embedded across cybersecurity workflows. And as these model providers themselves potentially push further into security, how do you see COMVAULT's role evolving to remain core to cyber resilience and how are you partnering with these platforms to protect customers in a more agentic world?

Sanjay Mirchandani: Hi, Junaid. you know, These models used right will first to make for better software, okay? More secure software. I think we're seeing the start of this in the industry. Our focus has always been a combination, making sure that the platform we provide, the Commvault capabilities we provide are equal parts data security, identity resilience, and recovery. I probably take that back. I'd say more recovery. We specialize on the recovery capabilities. It's with the same policy engine that gives you the provenance of what happened to the data to allow customers to truly recover.

Speaker #9: Hi, Junaid. It's these models, used right, will first of all make for better software. Okay? More secure software. So and I think we're seeing the start of this in the industry.

Speaker #9: Our focus has always been a combination making sure that the platform we provide, the COMVAULT CLOUD capabilities we provide, are equal parts data security, identity resilience, and recovery.

Speaker #9: I probably take that back. I'd say more recovery. And we specialize on the recovery capabilities. But with the same policy engine that gives you the provenance of what happened to the data, to allow customers to truly recover.

Sanjay Mirchandani: Whether the agent caused something to happen or a cyber attack caused something to happen or human error caused something to happen or a corruption caused something to happen, our focus always is data out, making sure we can get the data recovered for the business. The models will make for more secure software, I believe. What we need to do is stay focused on, and what we're focusing on is just getting customers back from anything that may have happened to their systems, at, you know, especially when you're looking at the pace at which AI changes things. I'm kind of giving you a 10,000 foot response on it, but we're obviously looking at it's a multi-pronged capability.

Speaker #9: So, whether the agent caused something to happen, or a cyber attack caused something to happen, or human error caused something to happen, or corruption caused something to happen, our focus always is data out.

Speaker #9: Making sure we can get the data recovered for the business. So the models will make for more secure software. I believe. But what we need to do is stay focused on and what we're focusing on is just getting customers back from anything that may have happened to their systems especially when you're looking at the pace at which AI changes things.

Sanjay Mirchandani: I'm kind of giving you a 10,000 foot response on it, but we're obviously looking at it's a multi-pronged capability. Whether it's agentic or cyber or just system provenance, you know, We're looking at all of that and making sure that our, you know, our capabilities can bring all of it back with single policy.

Speaker #9: So I'm kind of giving you a 10,000-foot response on it. But we're obviously looking at it's a multi-pronged capability whether it's agentic or cyber or just system provenance.

Sanjay Mirchandani: whether it's agentic or cyber or just system provenance, you know, We're looking at all of that and making sure that our, you know, our capabilities can bring all of it back with single policy.

Speaker #9: We're looking at all of that and making sure that our capabilities can bring all of that back with a single policy.

Michael Melnyk: Great. Mark, we'll take the next question, please.

Speaker #10: Great.

Speaker #7: Mark, we'll take the next question, please.

Operator: Our next question comes from the line of Joe Vondrick with Deutsche Bank. Joe, please go ahead.

Speaker #2: Our next question comes from the line of Joe Vandrick with Deutsche Bank. Joe, please go ahead.

Joe Vondrick: Thanks for taking my question. Sanjay, you called out multi-product adoption as a driver of growth and also touched on the momentum in your identity protection products. Can you talk about the typical deal size for identity and maybe the ACV uplift when a customer adds on that identity protection? Also, is there a way to think about what percentage of the base has adopted identity protection today, and should that adoption rate eventually get to 100%?

Speaker #11: Thanks for taking my question. Sanjay, you called out multi-product adoption as a driver of growth and also touched on the momentum in your identity protection products.

Speaker #11: Can you talk about the typical deal size for Identity, and maybe the ACV uplift when a customer adds on that identity protection? And also, is there a way to think about what percentage of the base has adopted identity protection today?

Speaker #11: And should that adoption rate eventually get to 100%?

Gary Merrill: It's Gary. I'll jump in and answer this for you. We don't disclose the actual ASP of our identity solutions. However, what I can provide to help is that it's a good land or a good expand motion to drive the stickiness in the platform. How we think about it internally is that it's less about the individual ASP of the offering, it's more how we're driving the adoption of the platform. When you get multi-product adoption, as you would expect in any business, our ARPA goes up significantly. We'll start to give color on that in the out quarters as we get going and get more penetration. To the positive side on opportunity, we've had great success on our identity year over year.

Speaker #7: It's Gary. I'll jump in and answer this for you. So what we don't disclose the actual ASP of our identity solutions. However, what I can provide to help is that if they good land or a good expand motion to drive the stickiness in the platform.

Speaker #7: So, how we think about it internally is that it's less about the individual ASP of the offering; it's more about how we're driving the adoption of the platform.

Speaker #7: Okay? And when you get multi-product adoption, as you would expect in any business, ARPA goes up significantly. Okay? And we'll start to give color now in the out quarters as we get going.

Speaker #7: And you get more penetration. To the positive side on opportunity, we've had great success on our identity year over year. The business grew about 100% year over year.

Gary Merrill: To the positive side on opportunity, we've had great success on our identity year over year. The business, we're about 100% year-over-year, and it's still a very small proportion of our install base that have adopted it. We still have a long runway of opportunity to drive that as we continue to enhance the platform with even more identity solutions. It's just not about the traditional Active Directory. When we get into other offerings like Okta.

Gary Merrill: The business, we're about 100% year-over-year, and it's still a very small proportion of our install base that have adopted it. We still have a long runway of opportunity to drive that as we continue to enhance the platform with even more identity solutions. It's just not about the traditional Active Directory. When we get into other offerings like Okta.

Speaker #7: And it's still a very small proportion of our install base that have adopted it. So we still have a long runway of opportunity to drive that as we continue to enhance the platform with even more identity solutions.

Speaker #7: So it's not just about traditional Active Directory. When we get into other offerings like Okta and others—Entra ID, it's the whole platform approach across multi-identity solutions.

Sanjay Mirchandani: Entra ID.

Gary Merrill: Entra ID, it's the whole platform approach across multi-identity solutions, which will drive multi-product adoption and then drive our ARPA, which we'll continue to talk about as we build those metrics out.

Speaker #7: Which will drive multi-product adoption and then drive our ARPA, which we will continue to talk about as we build those metrics out.

Sanjay Mirchandani: Right. Joe, just to close, I mean, just to give you a typical scenario, use case scenario, outcome-based scenario that a customer would look at. They would start with identity, they would look at Clean Room to be able to test that identity, and they would look at AGP, our Air Gap Protect capabilities, to be able to restore data from that secure location, whether it's for test purposes or production purposes. Without identity resilience, you are, it's an incomplete solution. That's how we think about it. In and of itself, it's a starting point. It's a good land spot. It's a good expand spot of a customer already using our technology. It really shines when you look at it, at the life cycle of how a customer would use it.

Speaker #9: Right. Joe, just to close, I mean, just to give you a typical scenario, use case scenario, outcome-based scenario that a customer would look at.

Speaker #9: They would start with identity. They would look at Clean Room to be able to test that identity. And they would look at AGP, our Air Gap Protect capabilities, to be able to restore data from that secure location whether it's for test purposes or production purposes.

Speaker #9: So without identity, resilience, you are it's an incomplete solution. So that's how we think about it. In and off itself, it's a starting point.

Speaker #9: It's a good landspot. It's a good expand spot if a customer is already using our technology. But it really shines when you look at the lifecycle of how a customer would use it.

Michael Melnyk: Mark, we'll take our last question, please.

Speaker #7: Mark, we'll take our last question, please.

Operator: Our last question comes from the line of Thomas Blakey with Cantor Fitzgerald. Tom, please go ahead.

Speaker #2: Our last question comes from the line of Tom Blakey with Gunther Fitzgerald. Tom, please go ahead.

Thomas Blakey: Well, thanks for squeezing me in here, Michael. Hello, Sanjay and Gary. Great to be working with you again. I guess my first question is on this net new ARR and constant currency metric that we, you know, heard from the company in the past. It seems like with, you know, AI increasing data, very successful push here in terms of, you know, organic growth from a new product perspective as well as M&A. It seems like if I'm looking at the moving pieces here, the new target of $1.205 billion in subscription ARR. Just maybe kind of talk about what we're kind of expecting here and embedding in the guide for net new ARR on a constant currency basis into fiscal 2027. That's my first question.

Tom Blakey: Well, thanks for squeezing me in here, Michael. Hello, Sanjay and Gary. Great to be working with you again. I guess my first question is on this net new ARR and constant currency metric that we, you know, heard from the company in the past. It seems like with, you know, AI increasing data, very successful push here in terms of, you know, organic growth from a new product perspective as well as M&A. It seems like if I'm looking at the moving pieces here, the new target of $1.205 billion in subscription ARR. Just maybe kind of talk about what we're kind of expecting here and embedding in the guide for net new ARR on a constant currency basis into fiscal 2027. That's my first question.

Speaker #12: Well, thanks for squeezing me in here, Michael. Hello, Sanjay and Gary. Great to be working with you again. I guess my first question is on this net new ARR and constant currency metric that we heard from the company in the past.

Speaker #12: It seems like with AI increasing data, there's been a very successful push here in terms of organic growth from a new product perspective, as well as M&A.

Speaker #12: It seems like if I'm looking at the moving pieces here, the new target of 1.205 billion in subscription ARR, just maybe kind of talk about what we're kind of expecting here and embedding in the guide for net new ARR and constant currency basis into fiscal 27.

Speaker #12: It's my first question.

Gary Merrill: Hey, Thomas. It's Gary. I'll jump in. How we'll be guiding net new ARR going forward, it's really tied to subscription ARR, the overall subscription ARR. That will be an annual guide. We set up the annual guide for FY 2027 at the midpoint. That's 18% and 18.5%. If you quantify that means that the amount of subscription net new ARR for the full fiscal year 2027 will be roughly $190 million. That's kind of the key benchmark. Now, what I won't be doing is giving a discrete guide on any individual quarter.

Speaker #7: Hey, Tom. It's Gary. I'll jump in. So we'll be guiding net new ARR going forward. It's really tied to subscription ARR, the overall subscription ARR.

Speaker #7: That will be an annual guide. So, we set up the annual guide for FY27 at the midpoint. That's 18 and 18.5 percent.

Speaker #7: Okay? If you quantify that, that means that the amount of subscription net new ARR for the full fiscal year '27 will be roughly $190 million.

Speaker #7: Okay, so that's kind of the key benchmark. Now, what I won't be doing is giving a discrete guide on any individual quarter, okay? As you've seen in our business in the past, there's going to be puts and takes from quarter to quarter.

Gary Merrill: As you've seen in our business in the past, there's gonna be puts and takes from quarter to quarter. We'll continue to provide, and I'll continue to provide the updated view of the annual number, how we're trending against that annual number, and also NT relative mix between the software and SaaS pieces of the business. For FY 2027, we continue to expect majority of that $190 million of net new ARR for the full year to continue to be led by acceleration in our SaaS platform, which should exceed about $500 million by the end of FY 2027.

Speaker #7: But we'll continue to provide and I'll continue to provide the updated view of the annual number, how we're trending against that annual number, and also NT relative mix between the software and SaaS pieces of the business.

Speaker #7: For FY27, we continue to expect majority of that 190 million dollars of net new ARR for the full year. To continue to be led by acceleration in our SaaS platform, which should exceed about 500 million dollars by the end of FY27.

Thomas Blakey: Well, super helpful, good to see the uptick there on the net new, you know, ARR basis that we could just maybe imply for fiscal 2027. Just maybe a look back at as it relates to look forward. Could you maybe expand on the market share gains that you experienced at the expense of some of the legacy players in fiscal 2026 and what you're embedding in the fiscal 2027 guide? That'd be helpful just given the dynamics there. Thank you very much, thanks for taking the questions.

Tom Blakey: Well, super helpful, good to see the uptick there on the net new, you know, ARR basis that we could just maybe imply for fiscal 2027. Just maybe a look back at as it relates to look forward. Could you maybe expand on the market share gains that you experienced at the expense of some of the legacy players in fiscal 2026 and what you're embedding in the fiscal 2027 guide? That'd be helpful just given the dynamics there. Thank you very much, thanks for taking the questions.

Speaker #12: Well, super helpful. And good to see the uptick there on the net new ARR basis that we could just maybe imply for fiscal '27.

Speaker #12: And just maybe a look back at as it relates to look forward. Could you maybe expand on the market share gains that you experienced at some of the at the expense of some of the legacy players in fiscal 26 and what you're embedding in the fiscal 27 guide?

Speaker #12: That'd be helpful just given the dynamics there. Thank you very much. And thanks for taking the questions.

Gary Merrill: Yep. Overall, FY 2026 was a strong net new customer, right? There was some fluctuation quarter to quarter. Q3 was an extremely strong piece of the business on net new. Q4 was more tied to our existing install expansion business. Overall, when you look out at the full fiscal year, we saw strong growth. It's beyond, I would say now, the legacy players that only have on-premise, because our value prop is the hybrid and managing those workloads on-premise or across multiple clouds. What you see in our subscription ARR, whether it shows up in software or in SaaS, it's our hybrid approach that's giving us the competitive advantage. We may swap out a legacy install on-premise, and that new deal will end up likely being hybrid across both on-premise and cloud.

Speaker #7: Yeah. Overall, FY26 was a strong net new customer. Right? There was some fluctuation quarter to quarter. Q3 was an extremely strong piece of the business on net loop.

Speaker #7: Q4 was more tied to our existing install expansion business. But overall, when you look out at the full fiscal year, we saw strong growth.

Speaker #7: And it's beyond, I would say now, the legacy players that only have on-premise because our value prop is the hybrid. It's the hybrid and managing those workloads on-premise or across multiple clouds.

Speaker #7: So what you see in our subscription ARR, whether it shows up in software or in SaaS, it's our hybrid approach that's giving us the competitive advantage.

Speaker #7: So we may swap out a legacy install on-premise and that new deal will end up likely being hybrid across both on-premise and cloud. So that's why the combined subscription ARR becomes the North Star metric because it will show the penetration of success of that hybrid new logo acquisition.

Thomas Blakey: Mm-hmm.

Tom Blakey: Mm-hmm.

Gary Merrill: That's why the combined subscription ARR becomes the North Star metric, because it will show the penetration success of that hybrid new logo acquisition.

Sanjay Mirchandani: That's key. The hybrid is key. We believe that as AI gets rolled out broadly in the enterprise, it will continue to be hybrid.

Speaker #7: That's key. The hybrid is key. And we believe that as AI gets rolled out broadly in the enterprise, it will continue to be hybrid.

Michael Melnyk: Mark, we're.

Michael Melnyk: Mark, we're. There are no further questions.

Michael Melnyk: There are no further questions.

Speaker #7: Mark, we're all there.

Operator: Okay. There's no further questions at this time. That concludes today's conference call. You may now disconnect.

Q4 2026 Commvault Systems Inc Earnings Call

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