The News: Commvault announced its financial results for the fiscal second quarter (Q2) ending September 30. Full details are available in the press release on the Commvault website.
Commvault Grows Q2 2024 Revenue Fueled by Metallic SaaS Growth
Analyst Take: Commvault reported fiscal 2024 Q2 revenue of $201 million, up 6.9% year-over-year (YoY) and exceeding its guidance range of $193 million-$197 million. Revenue growth was fueled by Commvault’s Metallic software as a service (SaaS) division; the company’s SaaS annual recurring revenue (ARR) grew 77% YoY during the quarter to $131 million. This growth drove total ARR, which CEO Sanjay Mirchandani noted is the primary metric that Commvault is using to measure its growth, up 18% YoY to $711 million.
Commvault is utilizing Metallic to address growing customer demand for backup and data protection as a service and to centrally protect hybrid multicloud environments. This strategy is helping to not only protect the company’s existing installed base but also attract new customers. Per Commvault, its total number of subscription customers rose from 6,100 in fiscal 2023 Q2 to 8,300 during fiscal 2024 Q2, and more than 60% of the SaaS customers brought in by Metallic during the quarter were net new to Commvault. It is also encouraging to see a rebound to Metallic’s net dollar retention rate, which was reported at 130% as opposed to the 118% reported in the prior quarter.
Managing costs will be important as Commvault increases its mix of SaaS subscriptions, which carry a higher cost of sale. While the company reported non-generally accepted accounting principles (non-GAAP) gross margin of 82%, down 150 basis points YoY and 50 basis points below the company’s guidance range, The Futurum Group notes that the company reduced operating expenses by 2% YoY – representing a decline of 310 basis points to 60% of revenue. Gary Merrill, Commvault’s CFO, noted an ability to control investment in people, facilities, and third-party expenses, with a sharpened investment focus in customer support and field sales teams to continue expanding its recurring revenue by maximizing its share of wallet and continuing the installed base with a balanced focus on accelerating time-to-first backup and time-to-consumption of the service.
Looking ahead, Commvault recognizes a modest decline in conversion from perpetual to subscription licenses, in part due to macro-level interest rate and general financial pressures. However, given that its renewal model for Metallic is maturing, it projects total revenue of between $206 million-$210 million, with subscription revenue of $106 million-$110 million (representing 24% YoY growth at its midpoint).
The Futurum Group will be attending Commvault’s SHIFT event in New York City on November 8, where Commvault plans to disclose additional detail on its product and partnership roadmap to further its initiatives around cloud hosting and protection as well as cyber-resiliency as a whole. Given that enterprises are facing massive sprawl of data and protection tools as well as increasing volume and sophistication of cyberattacks, the ability to be more preventative and proactive in the data security posture and to detect and respond to attacks more quickly to mitigate data loss and downtime are key areas of emphasis and spend. Commvault faces stiff competition and a crowded marketplace, but the company notes that it already protects more than 4 Exabytes of cloud data for over 100,000 organizations globally, and its ongoing integrations between its core platforms and Metallic will further help it capitalize.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Cyber-Detection and Recovery Drive Commvault’s Portfolio Strategy
Trends in Enterprise Data Protection 2023 – Research Study
Author Information
With a focus on data security, protection, and management, Krista has a particular focus on how these strategies play out in multi-cloud environments. She brings approximately 15 years of experience providing research and advisory services and creating thought leadership content. Her vantage point spans technology and vendor portfolio developments; customer buying behavior trends; and vendor ecosystems, go-to-market positioning, and business models. Her work has appeared in major publications including eWeek, TechTarget and The Register.
Prior to joining The Futurum Group, Krista led the data protection practice for Evaluator Group and the data center practice of analyst firm Technology Business Research. She also created articles, product analyses, and blogs on all things storage and data protection and management for analyst firm Storage Switzerland and led market intelligence initiatives for media company TechTarget.
