Commvault Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Commvault Q2 FY 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your host, Mike Malnick, Head of Investor Relations. You may begin.

Thanks, Kevin. Good morning, and thanks for dialing in today for our call to discuss our second quarter fiscal year 2022 earnings results. Before we begin, I'd like to remind everyone that the statements made during this call, including the question and answer session of the call, may include forward-looking statements, including statements regarding financial projections and future performance. All the statements that relate to our beliefs, plans, expectations, or intentions regarding the future are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Actual results may differ materially due to the risk and uncertainties, such as competitive factors, difficulties, and delays inherent with development, manufacturing, marketing, and sale of software products and related services, and general economic conditions. For discussion of these and other risks and uncertainties affecting our business, please see the risk factors contained in our annual report on Form 10-K and our most recent quarterly report on Form 10-Q and our SEC filings and in the cautionary statement contained in our press release on our website. The company undertakes no responsibility to update the information on this conference call under any circumstance. In addition, the development and timing of any product release, as well as features or functionality remain at our sole discretion. Our press release related to today's announcement was issued over the wire services this morning and has been furnished to the SEC as an 8K filing. The press release is also available on our investor relations website. On this conference call, we refer to non-GAAP financial measures. A reconciliation between non-GAAP and GAAP can be found on our website. This conference call is being recorded and a replay is available for the webcast. An archive of today's webcast will be available on our website following the call. Now with me on the call this morning are Sanjay Merchandani, President and Chief Executive Officer of Commvault, and Brian Carolyn, Chief Financial Officer of Commvault. Sanjay and Brian will each share opening remarks and commentary before we open the call for Q&A. Now I'll turn the call over to Sanjay. Thank you, Mike.

Good morning. Good morning. This is Sanjay. Good morning and thank you for joining us to discuss our Q2 22 results. We continue to capitalize on the evolution of the hybrid cloud market where Commvault is playing an increasingly important role in high priority, large IT transformation and ransomware remediation projects. While Q2 software revenue growth didn't meet our guidance, the impact was principally isolated to software opportunities that are part of larger IT transformation projects. In addition, we believe industry-wide supply chain issues are impacting our customers' sourcing of hardware components and associated software opportunities. While we don't believe this represents a long-term issue, we factored additional conservatism into our Q3 guidance, which Brian will cover later in the call. Several key highlights reflect the strength of our business and the ongoing progress in executing our transformation. Total ARR grew 12% year-over-year to $543 million. Importantly, subscription and SaaS ARR grew more than 40% year-over-year to 278 million, and now represents more than half of total ARR. We're driving this growth through market share gains, as evidenced in part by Q2 revenue from new customers, which finished at the highest level in years. In addition, our SaaS offering, Metallic, is growing rapidly, and in just over a year of being commercially available, is now a meaningful contributor to our total ARR growth. Now I'll provide you some additional color on the quarter and reasons for our optimism, which are centered around four critical indicators. First, our ability to win new business and gain market share are meaningful inflection points for Commvault. Our largest transaction this quarter, a multi-million dollar win at one of the biggest healthcare organizations in the world, was a new customer and a competitive displacement. Over 50% of subscription transactions were new logos for Commvault. and more than 60% of Metallic customers were new to Commvault. Second, every indication is that customers are embracing the power of AND, or leveraging software and SaaS to more easily and safely support the hybrid cloud journeys. For instance, the total number of transactions that involve more than one product increased 150% year over year. About half of our seven-figure software transactions involve multiple products and services. And Metallic landed its largest transaction to date, a high six-figure deal that included multiple product offerings. Which brings us to our third indicator. Metallic is exceeding our internal expectations and outpacing the market and growth trajectories of leading SaaS startups. IDC projects the data management of the service market will grow at a mid-teens CAGR over the next several years to over $15 billion by 2024. With Metallic, we believe that we have an enterprise-grade first mover advantage to continue capturing share in this space. And while it has been commercially available for just over a year, Metallic has already achieved many significant milestones, which include doubling its portfolio with new offerings for Salesforce and Microsoft Dynamics 365, and expanding availability to more than 30 countries, adding data protection for enterprise workloads on SAP HANA and Oracle, as well as for containers and Active Directory. expanding storage and edge offerings with flexible storage tiers for Metallic Cloud Storage and Commvault Hyperscale X. Launching Metallic Government Cloud, the only data protection solution to meet the stringent FedRAMP high security protocols required by federal agencies. And we're now making Metallic available for managed service providers to offer their own suite of value-added services built on Metallic. Last week, we announced an integrated solution with GM SecTech, a leading global managed security service provider for ransomware readiness, backup, and data recovery as a service. Additionally, our major cloud partners see the value Commvault brings to drive cloud consumption. In fact, Microsoft notes that Commvault slash Metallic is a top global Azure CoSell ISV Microsoft partner. and Google called us a leading backup and disaster recovery partner on Google Cloud. This is tremendous validation, and these relationships continue to mature. This is just the beginning. As customers transition to the hybrid cloud, they will need flexible and scalable solutions, which is why the power of AND, or the ability to combine the best of both software and SaaS, is so critical. We believe this is our competitive advantage. Finally, we operate in a large and growing market, And our portfolio has been designed to align with market trends, including data management and ransomware recovery. Rapid data growth across multiple generations of ecosystems, applications, and hybrid environments introduces risks that can impair a company's growth and operating objectives. For example, today, every business in every industry is facing the very real threat of ransomware. At Commvault, we regularly help customers recover from these attacks. Just last month, a nationally acclaimed healthcare leader in the U.S. was hit by an attack that dropped on hundreds of servers, including their entire VM environment and three petabytes of application information. Our software ensured the backup remained intact, and with the help of our industry-leading cost customer support team, they were able to get back to full operation within 24 hours. Simply put, one of the best defenses against ransomware is data protection with an immutable backup. Additionally, our new Comvault ransomware protection and response services give customers a multi-pronged approach to ransomware protection. This is just one service, a full complement of data management capabilities to help customers. And the industry is taking note. Phil Goodwin at IDC commented, given that more than 90% of organizations use public cloud in their backup strategies, Comvault is positioned to solve They're preponderance of an organization's data protection needs, including hybrid cloud, multi-cloud, and edge. In summary, while our Q2 results were mixed, I'm confident that we have the right strategy for the long term, and we're making real progress, as demonstrated by the strength of the underlying data I've shared. We are capturing market share, expanding our footprint with a more comprehensive portfolio, and we believe that we're in prime position with Metallic to meet the changing needs of customers as they navigate their cloud journeys. Now I'll turn it over to Brian for a closer look at the financials. Brian?