Commvault Systems recently posted Q4 FY2023 financial results and end-of-year data showing a 2% increase in revenue compared to 2022 ($784.6 million), while Q4 represented a decrease of 1% year on year ($203.5 million). With ARR increasing but recurring revenue flat, what’s next for this data protection business?
Background
Commvault’s last two quarters of FY2023 were marginally down on the equivalent quarters of 2022, as shown in Figure 1. Annual revenue continues to grow, as shown in Figures 2 & 3. However, the historical trend for the last ten years has been to see a slight dip in revenue for each fourth year of what looks like a repeating cycle.
It’s also interesting to note from the data shown in Figure 4 that three of the last four years have demonstrated negative net income. Some of the FY2023 loss is attributable to changes in real estate, as Commvault sells off and leases part of the corporate HQ.
Metallic
Commvault is on a journey of reinvention. As we pointed out in this blog post from 2021, SaaS is the future direction of the company, with Metallic now representing over $100 million in ARR and 15% ARR growth over the last 12 months (this information comes from the press release).
In the traditional business, the number of large deals is down (187 compared to 226 for the previous year), however, average deal size was up 6% at $347,000. Data protection is a “sticky” business, with lots of long-term data retention. As a result, it’s not a surprise to see a long tail of traditional licensing.
Next Steps
In common with the broader industry, Commvault has solutions and products to address the issue of ransomware. As discussed on a recent podcast we recorded, ThreatWise allows customers to create decoys to enable early warning detection of potential ransomware attacks. This is just one aspect of a multi-layered approach that encompasses the entire issue of trust within enterprise technology.
Commvault also has a suite of storage solutions built from the acquisition of Hedvig in 2019. However, this part of the portfolio seems to gain less airtime than Metallic and hasn’t lived up to the potential the Hedvig solution offered.
The Architect’s View®
The data protection market is increasingly competitive, with many established companies, start-ups and “long-lived start-ups” competing for business with maturing public cloud protection capabilities. The stakes are high, with massive amounts of investment over the last ten years (of which this referenced post covers only a portion).
There simply isn’t enough business for all of these companies to grow, so some have moved to be more focused on data security. At the same time, data protection needs to evolve towards data loss prevention, where the strategy is focused on protecting assets from both malicious destruction (traditional ransomware) and outside exposure (also ransomware, but with reputational damage).
This transition is one we see being necessary for Commvault and other players in the industry if they want to grow and survive. This means partnering with or acquiring companies with specific domain knowledge on end-to-end security, zero trust, data encryption and protection.
Of course, Commvault needs to continue to grow Metallic while supporting existing traditional customers. This includes coming up with equivalent solutions to those from HYCU with R-Cloud and the announced (but not available) SaaSBACKUP from Asigra.
There’s a lot still to do for Commvault and the data protection industry in general. You can find more on our data protection coverage at our data protection microsite and more on Commvault at the Commvault microsite.
Copyright (c) 2007-2023 – Post #5e11 – Brookend Ltd, first published on https://www.architecting.it/blog, do not reproduce without permission. Commvault is a Tracked Vendor by Architecting IT for data protection and storage systems. Commvault has previously been a customer of Architecting IT and Brookend Ltd.