Commvault Systems, Inc.

Good day, and thank you for standing by. Welcome to the Commvault fiscal year 2024 earnings conference 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Melnick, Head of Investor Relations. Please go ahead.

Good morning, and welcome to our earnings conference call. I'm Mike Melnick, Head of Investor Relations, and I'm joined by Sanjay Merchandani, Commvault CEO, and Gary Merrill, Commvault CFO. An earnings presentation with key financial and operating metrics is posted on the investor relations website for your reference. Statements made on today's call will include forward-looking statements about Commvault, future expectations, plans, and prospects. All such forward-looking statements are subject to risk, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for discussion of the risk 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. During the call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between GAAP and non-GAAP can be found on our website. Thank you for joining us. Now I'll turn the call over to Sanjay for his remarks. Sanjay?

Thank you, Mike. Good morning. I'm pleased to report our Q1 results met our expectations. and position us well for fiscal year 2024. Let me share some highlights. Total ARR, the metric we use to measure the growth of our recurring revenue streams, increased 15% year-over-year to $686 million. Our subscription ARR grew 32% year-over-year to $500 million. Metallic, our hyper growth SaaS platform, grew ARR 72% year-over-year and now exceeds 4,000 customers. All of these showcase the strength of our subscription-based recurring revenue model that we've been driving to over the past several years. And we did it while delivering 22% EBIT margins and continuing to return cash to shareholders through share repurchases. Our strategic objective is clear, to be the leading cloud-first data protection company in the industry. This requires constant innovation, execution excellence, and the ability to rapidly evolve with the ever-changing data protection market. Our customers have reached an inflection point driven by four major forces that are shifting the data protection demands and expectations of the modern enterprise. One, they're experiencing unique and complex challenges on their hybrid cloud journeys. Two, customers shouldn't have to choose between a software and SaaS. At this point, it should be a natural and seamless decision with a modern unified platform. Three, The world of data protection and data security are converging and require customers to consider a new approach. And lastly, the advancements in artificial intelligence have opened the door to improved customer experiences and increased value. Let's discuss each of these. The first and perhaps most important is the industry-wide move towards the hybrid cloud. According to a recent report, 82% of IT leaders say that they have adopted the hybrid cloud nearly half of which are embracing multiple public clouds. As a result, data is distributed across multiple environments. It's fragmented and in flight. Managing this new reality can become untenable in cost, complexity, and security delivered at scale. To manage all of this, today's hybrid enterprises are doing nothing at all, or a patchwork of anything from basic cloud-native backup to point solutions. Some SaaS, some software, each intended to solve a piece of the puzzle. Rather than holistically simplifying and managing everything, this only increases more complexity and cost. This is where Commvault comes in, which leads me to the second major force. Customers crave the power and simplicity of a single as a service solution. Today, customers are forced to make unnatural choices that are inefficient and unsustainable. Instead, they need the best of both software and SaaS in a single solution. Our cloud-based data protection platform does just that, has software or SaaS on the same control plane. Not only do we help customers reduce complexity, our unified platform has the best total cost of ownership and greater value than any solution that we compete against, cloud native or software. This is revolutionary for the industry and positions us as the company to beat within the category. And both existing and new customers are embracing this technology. I'll discuss three examples. First, we won an M365 deal with Netcare, a publicly traded South African healthcare company. The company cited the simplicity and cost efficiency of our single platform versus the existing cloud-native solution as the key decision-making criteria. Second, thesis, a SaaS-based student learning system chose Commvault to drive six-figure cost savings versus its cloud-native tools. Third, a Fortune 1000 food manufacturer and an existing Commvault software customer expanded with our SaaS solution to protect thousands of Office 365 users. With each of these customers, we were the natural choice given our proven mission-critical capabilities, our ability to operate between technologies and workloads, our cost advantages, and our capability to accommodate future cloud use cases on our platform. These examples are consistent with the trends we've seen every quarter since the launch of our SaaS platform. 40% of our SaaS customers use another Commvault product, and 30% use multiple SaaS offerings. Software and SaaS are complementary and are creative to our business. Which brings us to the third course. As a line between data protection and data security blurs, customers are rethinking their approach to modern cyber resiliency. Ransomware threats are on the rise again in 2023. Data from cryptocurrency trading firm Chain Analysis indicates cyber ransom payments more than doubled in the first half of 2023. And a report by Cybersecurity Ventures notes that cybercrime will account for $10.5 trillion in costs by 2025. Of course, ransomware is only part of the modern era of pervasive autonomous threats in conjunction with other malicious data exfiltration and data destruction activities. This is increasingly driving the need for a layered security approach that includes predictive threat analytics to defend both backup and production workloads and ironclad cyber resilience in the case of a breach. No amount of preemptive defense can take the place of unfailing rapid recovery, and no amount of security is 100% successful. The two must operate hand in hand. Building on the early success of our ThreatWise cyber deception offering, In June, we offered new security capabilities across our portfolio. These were designed to help customers proactively and reactively secure, defend, and recover their production workloads while strengthening their backup infrastructure. These advanced security features are managed and delivered through the simplicity of our new cloud command interface, which provides global visibility and smart insights across all workloads, monitoring backup health and security posture. We also expanded our security ecosystem to include product integrations with Microsoft, Palo Alto, SampleOne, and CyberArk. While others in the industry provide limited point solutions, Commvault offers a platform that protects and enables customers to recover both production and backup environments. Finally, the fourth force impacting data protection is the topic that's driving an unprecedented frenzied adoption of AI across every enterprise. The rise of generative AI is ushering in a new era one that is increasingly automated and autonomous and moving faster than one can imagine. We've been using AI and machine learning for years in our technology and our operations. Further leveraging AI-driven automation across our platform, we can help customers rapidly recover and also constantly optimize, manage, and control every aspect of their data protection capabilities. We're continuing to incorporate AI-based roadmaps across our offerings and we'll take a very considered point of view around the right way to apply this new technology as it matures. How organizations secure, defend, and recover their most precious asset, their data, is fundamentally changing due to these forces. The bottom line is we can no longer look at each separately. The future of our industry depends on our proven ability to offer a seamless, automated, and cost-effective approach to these hard problems. In the fall, we'll be announcing some exciting capabilities and offerings that will further empower customers and redefine the industry. With that, I'll turn it over to Gary to discuss the numbers. Gary?