Commvault Systems, Inc. (CVLT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects strong financial performance, with a 46% increase in revenue and consistent gross margins. While operating expenses are high, the increase in non-GAAP EBIT and free cash flow is encouraging. The Q&A section highlights successful cross-sell and upsell strategies, and the raised revenue guidance indicates confidence in future performance. Despite some unclear responses from management, the overall sentiment is positive, driven by robust growth metrics and strategic focus on cyber resilience.
Key Financial Performance
Total ARR $996 million, a 24% increase year-over-year. This growth was driven by strong performance across the business.
Subscription ARR $844 million, a 33% increase year-over-year. This was led by a 63% increase in SaaS ARR to $307 million.
Total Revenue $282 million, a 26% increase year-over-year. This growth was supported by a 46% rise in subscription revenue.
Subscription Revenue $182 million, a 46% increase year-over-year. This was driven by strong land and expand performance and gains across regions, industries, and transaction sizes.
Gross Margins 82.4%, consistent with expectations for total gross margins to remain in the low 80% range.
Operating Expenses $173 million, representing 61% of total revenue. This included planned headcount growth, investments for growth, and higher commissions and bonuses on record sales results.
Non-GAAP EBIT $58 million, a 21% increase year-over-year. Non-GAAP EBIT margin was 20.7%.
Free Cash Flow $30 million, driven by strength in deferred revenue from SaaS contracts and solid software subscription renewals.
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Operating Highlights
Cleanroom Recovery: Growth with Cleanroom Recovery offering, enabling customers to test cyber resiliency. A government institution in the Middle East adopted this along with Air Gap Protect, Active Directory, and Cloud Rewind for enhanced security.
Recovery Range: Introduced Recovery Range, a hands-on experience for security and IT teams to simulate real-world attacks and test preparedness.
Satori Cyber Acquisition: Announced intent to acquire Satori Cyber, a data and AI security company, to strengthen data security offerings and address AI-related threats.
SaaS ARR Growth: SaaS ARR grew 63% to $307 million, surpassing 8,000 customers and nearing a $330 million ARR target ahead of schedule.
Cloud Marketplaces: Achieved triple-digit growth in marketplace transactions, with multiple six-figure and seven-figure deals.
Geographic and Industry Growth: Posted healthy growth across geographies, industries, and customer segments, from enterprise to SMB.
Subscription Revenue: Increased 46% to $182 million, with subscription ARR constituting 85% of total ARR.
Customer Expansion: Acquired 700 net new subscription customers, with SaaS customers utilizing two or more products increasing by 45%.
Profitability: Non-GAAP EBIT grew 21% to $58 million, with a 20.7% EBIT margin. Free cash flow was $30 million.
Partnerships: Formed strategic alliances with Deloitte, CrowdStrike, HPE, and Kyndryl to enhance cyber resilience and recovery capabilities.
Gartner Recognition: Named a leader in the Gartner Magic Quadrant for Backup and Data Protection Platforms for the 14th consecutive time.
AI and Data Security: Focused on protecting AI data and addressing threats posed by AI abuse, with plans to integrate Satori Cyber's capabilities.
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Risk or Challenges
Cybersecurity Threats: The company operates in a market with relentless threats and attacks, requiring continuous innovation and preparedness to maintain resilience. This includes risks from AI agent abuse, as highlighted by Gartner's prediction of enterprise breaches by 2028.
Regulatory Compliance: The company must ensure compliance with various regulatory requirements, such as FAA and aircraft manufacturer compliance, which adds complexity and potential risks to operations.
Integration of Acquisitions: The acquisition of Satori Cyber is expected to be modestly dilutive to margins for the next several quarters, posing a short-term financial risk.
Economic and Currency Risks: The company faces risks related to foreign exchange fluctuations, as highlighted by the constant currency adjustments in their financial reporting.
Market Competition: The company operates in a highly competitive market, requiring continuous innovation and strategic partnerships to maintain its leadership position.
Operational Costs: Planned headcount growth and investments to support growth trajectory could increase operational costs, impacting profitability.
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Guidance & Outlook
Q2 FY '26 Subscription Revenue: Expected to be in the range of $174 million to $176 million, representing 31% year-over-year growth at the midpoint.
Q2 FY '26 Total Revenue: Expected to be in the range of $272 million to $274 million, with growth of 17% at the midpoint.
Q2 FY '26 Consolidated Gross Margins: Expected to be in the range of 81% to 82%.
Q2 FY '26 Non-GAAP EBIT Margins: Expected to be approximately 20%, including the integration of Satori Cyber.
FY '26 Total ARR Growth: Expected constant currency growth of 18% year-over-year.
FY '26 Subscription ARR Growth: Expected to increase by 24% year-over-year.
FY '26 Subscription Revenue: Expected to be in the range of $753 million to $757 million, growing 28% at the midpoint.
FY '26 Total Revenue: Expected to be in the range of $1.161 billion to $1.165 billion, an increase of 17% at the midpoint.
FY '26 Gross Margins: Expected to be in the range of 81% to 82%, reflecting growth in the SaaS platform.
FY '26 Non-GAAP EBIT Margins: Expected to be approximately 20.5%, including the dilutive impact of Satori.
FY '26 Free Cash Flow: Expected to be in the range of $210 million to $215 million.
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Shareholder Return Plan
Stock Repurchase: During the quarter, we repurchased $15 million of stock and our diluted share count remained flat at 45 million shares.
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Key Q&A
Q:Are there any revenue contributions from the Satori acquisition?
A:The Satori acquisition is immaterial from a top-line perspective and does not factor into any revenue guidance uplift.
Q:What progress has been made in cross-sell and upsell opportunities?
A:The company has seen a 45% increase in customers using two or more solutions. Additionally, 40% of SaaS net dollar retention rate came from cross-sell, and security SKUs grew double digits quarter-over-quarter, contributing 20% of net new ARR.
Q:What is the company's bundling strategy?
A:The company offers logical bundles like Cleanroom and Active Directory or Office 365 and Active Directory. More bundles will be introduced as the cyber resilience platform evolves, with further details to be shared at the Shift event in November.
Q:What are the key categories for evaluating M&A opportunities?
A:The company focuses on acquisitions that enhance security, cloud-native capabilities, and AI data protection. Recent acquisitions like TrapX, Appranix, Clumio, and Satori align with these goals.
Q:How does the Satori acquisition address AI governance and policy enforcement?
A:Satori enhances visibility, observability, and policy enforcement across semi-structured and structured data, integrating these capabilities into the platform for seamless AI model training and data governance.
Q:How does the renewal base impact the raised full-year revenue guidance?
A:The raised guidance reflects the strength of the business on both software and SaaS sides, with the renewal base already factored in.
Q:Why did net new ARR in Q1 skew more towards term licenses?
A:The SaaS business performed as expected, but higher close rates on a few software deals at the end of the quarter led to overperformance in the software segment.
Q:What are the expectations for SaaS net new ARR and total net new ARR going forward?
A:The company expects SaaS net new ARR to exceed $20 million and total net new ARR to be around $40 million per quarter for the rest of the year.
Q:What are the assumptions for the federal business in the guidance?
A:The federal business performed in line with expectations in Q1, with similar seasonality expected in the first half of the year. The FedRAMP High certification is a competitive advantage.
Q:Why are operating margins not dropping more to the bottom line?
A:Increased bonus and commissions, planned headcount additions, and the growth of the SaaS business, which has a different margin profile, are factors. The company achieved a Rule of 40 score of 47, reflecting balanced growth and profitability.
Q:What is the contribution of Microsoft 365 and newer solutions to ARR?
A:Microsoft 365 and Air Gap Protect are the most mature products and carry the lion's share of ARR. Security offerings like Threatwise, ThreatScan, and others grew double digits quarter-over-quarter, contributing 20% of net new ARR.
Q:What is the status of subscription migrations within the base?
A:85% of the business is on a recurring subscription base. Growth is driven more by new customer lands rather than migrations.
Q:What is the sustainability of competitive displacements and workload consolidation?
A:The company is taking market share due to its leading technology, partner ecosystem, and ability to provide transparent protection across hybrid environments. Customers are consolidating vendors, which benefits the company.
Q:Are there any signs of customers pulling forward budgets?
A:The company is not seeing any pull-forward activity; the strong performance is attributed to market strength and effective execution.
Q:What changes have been made to compensation plans?
A:The team is incentivized to focus on recurring revenue, with a pay-for-performance model.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers or sufficient details to questions about the bundling strategy's future specifics (e.g., 'hold that question for a little longer') and the exact breakdown of SaaS net new ARR growth expectations. Additionally, there was limited transparency on the linearity of the quarter and the granularity of organic operating margins.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Gartner
AI agent
AI road
AI security
AI way
ARR Subscription
Aaron Rakers
CISOs
Chief Financial
Cleanroom Recovery
Co Research
Conference
Cyber
Financial Officer
HPE
Inc Research
LLC Research
Research Division
Securities LLC
attack
cloud marketplace
cyber preparedness
cyber resilience
driver
ecosystem
figure
incident
land
outage
readiness
response
security team
service
simulation
time
CVLT Transcript
Commvault Systems, Inc. (CVLT) Q4 2026 Earnings Call Transcript
Positive4-28
The earnings call highlights strong subscription revenue growth, optimistic guidance with 18% total revenue growth and 30% subscription revenue growth, and a promising partnership with Pinecone for AI solutions. The focus on AI and cloud sovereignty is a positive market strategy. Despite some uncertainties in management responses, the overall sentiment is positive due to robust financial metrics and strategic initiatives, likely leading to a stock price increase in the 2% to 8% range over the next two weeks.
Commvault Systems, Inc. (CVLT) Q3 2026 Earnings Call Transcript
Positive1-27
The earnings call highlights strong SaaS ARR growth, a positive outlook on cloud data, and increased free cash flow guidance. Despite some concerns about ARR and term duration, the company's innovation and integration of Satori Cyber, as well as a focus on cloud and SaaS, suggest positive momentum. The Q&A session confirms a robust performance across regions and verticals, with no significant negative trends. The absence of market cap data suggests a moderate positive reaction, likely in the 2% to 8% range, given the overall positive sentiment and strategic growth initiatives.
Commvault Systems, Inc. (CVLT) Q2 2026 Earnings Call Transcript
Positive10-28
The earnings call reflects strong financial performance, with significant growth in subscription revenue and ARR. Despite some concerns about competition and contract duration shifts, the company's strategic investments in SaaS and market share gains are promising. The Q&A indicates confidence in growth and resilience strategies, with positive insights on TAM growth and competitive positioning. Overall, the sentiment is positive, with potential for stock price increase driven by strong financials and optimistic guidance.
Commvault Systems, Inc. (CVLT) Q1 2026 Earnings Call Transcript
Positive7-29
The earnings call summary reflects strong financial performance, with a 46% increase in revenue and consistent gross margins. While operating expenses are high, the increase in non-GAAP EBIT and free cash flow is encouraging. The Q&A section highlights successful cross-sell and upsell strategies, and the raised revenue guidance indicates confidence in future performance. Despite some unclear responses from management, the overall sentiment is positive, driven by robust growth metrics and strategic focus on cyber resilience.
CVLT Slides
CVLT Report
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