Commvault Announces Q2 FY2024 Results

Commvault Systems has posted Q2 financial data for FY2024, showing a 7% increase year-on-year and a significant increase in subscriptions and ARR revenue. These results highlight how the company is transforming into a SaaS platform as businesses realise the benefit of data protection as a service.

Background

In Q1 FY2024, Commvault reported total revenue of $201 million, up 6.9% on the equivalent quarter in FY2023. Looking at a breakdown of the figures, Subscription revenue rose 24.9% year-on-year, while perpetual licence revenue was down 27.4%. Gross margin declined slightly from 83% to 81% in the current quarter. Figures 1 and 2 show this data by quarter from Q1 FY2016 onwards.

Figure 1 – Commvault Financials 1Q FY2016 – 2Q FY2024

Service Revenue

The most apparent change in this data is the transformation to a subscription model, while the perpetual licence business slowly declines. Commvault introduced Metallic in October 2019. Over the last four years, both Subscription revenue and ARR have increased steadily (although we only have a small recent set of data broken down by revenue source).

Another aspect of this data is the move away from cyclical revenue peaks, which typically occurred in Q3 and Q4, followed by a dip in Q1 and Q2. The last four quarters have seen increasing growth compared to the previous quarter, reflecting the benefit of a recurring revenue model.

The Architect’s View®

In February 2021, we suggested that the future of the Commvault business was a continued pivot towards Metallic and the storage-as-a-service model. Several factors influenced that opinion, including:

Data protection for SaaS – software-as-a-service solutions need data protection, including the obvious productivity solutions (Microsoft 365) and Salesforce. There is a wide range of “not so obvious” other platforms out there too, which are currently embedded into daily business operational practices. The TAM for SaaS backup will be enormous.
Threat of Ransomware – ransomware attacks are evolving (in a Darwinian way) to the extent that on-premises software deployments can’t keep up with the software updates needed to keep ahead of the hackers. Only SaaS platforms will have the agility and ability to adapt to new threats and introduce new mitigations.
Diversity – data is now distributed across myriad platforms, including on-premises, public cloud, SaaS, and edge locations. SaaS is the only way to harmonise the data protection of these operational locations while maintaining consistent and unified reporting.
Value-Add – with a SaaS platform, value-added services focused on governance and compliance can be easily added and extended without work by the customer.

With these aspects in mind, SaaS is the long-term destination for data protection, with a caveat on how very large enterprises are managed (which is likely to be hybrid in nature).

Commvault has made the move to pivot and disrupt its perpetual licence business, but in a way that enables customers to make a transition, without necessarily discarding legacy backups.

The next stage of Metallic evolution is to double down on the benefits of forensic and early warning technologies like ThreatWise in conjunction with the capabilities of governance and compliance offered by the platform. The result will be a much more rounded and mature set of data management offerings, of which data protection is just one aspect.

Copyright (c) 2007-2023 – Post #de39 – 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.

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