Stock Story -
Data backup provider Commvault (NASDAQ:CVLT) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 13.4% year on year to $224.7 million. The company also expects next quarter's revenue to be around $220 million, slightly above analysts' estimates. It made a non-GAAP profit of $0.85 per share, improving from its profit of $0.72 per share in the same quarter last year.
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Commvault Systems (CVLT) Q2 CY2024 Highlights:
- Revenue: $224.7 million vs analyst estimates of $215.5 million (4.2% beat)
- Adjusted Operating Income: $48.3 million vs analyst estimates of $40.21 million (20.1% beat)
- EPS (non-GAAP): $0.85 vs analyst estimates of $0.73 (15.8% beat)
- Revenue Guidance for Q3 CY2024 is $220 million at the midpoint, above analyst estimates of $218 million
- The company lifted its revenue guidance for the full year from $909 million to $920 million at the midpoint, a 1.2% increase
- Gross Margin (GAAP): 82.3%, in line with the same quarter last year
- Free Cash Flow of $43.83 million, down 44.6% from the previous quarter
- Billings: $234.1 million at quarter end, up 22.5% year on year
- Market Capitalization: $5.40 billion
Originally formed in 1988 as part of Bell Labs, Commvault (NASDAQ: CVLT) provides enterprise software used for data backup and recovery, cloud and infrastructure management, retention, and compliance.
Data StorageData is the lifeblood of the internet and software in general, and the amount of data created is accelerating. As a result, the importance of storing the data in scalable and efficient formats continues to rise, especially as its diversity and associated use cases expand from analyzing simple, structured datasets to high-scale processing of unstructured data such as images, audio, and video.
Sales GrowthAs you can see below, Commvault Systems's revenue growth has been weak over the last three years, growing from $183.4 million in Q1 2022 to $224.7 million this quarter.
This quarter, Commvault Systems's quarterly revenue was up 13.4% year on year, above the company's historical trend. However, its growth did slow down compared to last quarter as the company's revenue increased by just $1.38 million in Q2 compared to $6.48 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter's guidance suggests that Commvault Systems is expecting revenue to grow 9.5% year on year to $220 million, improving on the 6.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 8.2% over the next 12 months before the earnings results announcement.
Gross Margin & Pricing PowerSoftware is eating the world. It's one of our favorite business models because once you develop the product, it usually doesn't cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
Commvault Systems's robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve higher operating profits at scale. As you can see below, it averaged an impressive 82% gross margin over the last year. Said differently, roughly $82.00 was left to spend on selling, marketing, and R&D for every $100 in revenue.
Commvault Systems's gross profit margin came in at 82.3% this quarter, which is in line with the same quarter last year. Zooming out, the company's full-year margin has been consistent over the past 24 months, suggesting its input costs have been stable and it isn't under pressure to lower prices.
Key Takeaways from Commvault Systems's Q2 Results We were impressed by how strongly Commvault Systems blew past analysts' revenue, billings, adjusted operating income, and EPS expectations this quarter. We were also excited it raised its full-year revenue guidance. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 3.8% to $128 immediately following the results.
