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Tinton Falls, N.J. – July 28, 2015 — /BackupReview.info/ — Commvault [NASDAQ: CVLT] today announced its financial results for the first quarter ended June 30, 2015.
N. Robert Hammer, Commvault’s Chairman, President and CEO stated, “Our fiscal first quarter proved to be more challenging than we expected. However, during the quarter we made excellent progress on our business transformation plan. The core foundational elements are now in place to propel improvement in the second half of the fiscal year. We believe the substantial changes we are making will strengthen our competitive position, increase our available market, make it easier for our channel partners to sell, and enable us to execute our plans to significantly improve revenue and earnings growth. On a separate note, I am pleased to report that Gartner has positioned Commvault in the “Leaders” quadrant of the Magic Quadrant for Enterprise Backup Software and Integrated Appliances for a fifth consecutive year. We believe this is a validation of the strength of our products and our company vision.”
Total revenues for the first quarter of fiscal 2016 were $139.1 million, down 9% compared to the first quarter of the prior fiscal year and down 2% on a year-over-year constant currency basis. Software revenue in the first quarter of fiscal 2016 was $56.5 million, a decrease of 22% year-over-year and a decrease of 19% sequentially. On a constant currency basis, software revenue in the first quarter of fiscal 2016 decreased 15% year-over-year. Services revenue in the first quarter of fiscal 2016 was $82.6 million, an increase of 3% year-over-year and 2% sequentially. On a constant currency basis, services revenue in the first quarter of fiscal 2016 increased 9% year-over-year.
On a GAAP basis, loss from operations (EBIT) was $6.3 million for the first quarter compared to income of $18.2 million in the same period of the prior year. Non-GAAP income from operations (EBIT) decreased to $9.3 million in the first quarter of fiscal 2016 compared to $33.0 million in the first quarter of the prior year.
For the first quarter of fiscal 2016, Commvault reported a net loss of $1.3 million. Non-GAAP net income for the quarter was $5.8 million, or $0.12 per diluted share.
Operating cash flow totaled $21.9 million for the first quarter of fiscal 2016. Total cash and short-term investments were $411.4 million as of June 30, 2015 compared to $387.6 million as of March 31, 2015. During the quarter there were no borrowings against the revolving credit facility.
A reconciliation of GAAP to non-GAAP results has been provided in Financial Statement Table IV. (Download Financial Tables) An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”
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Use of Non-GAAP Financial Measures
These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided in Table IV. (Download Financial Tables)
Non-GAAP income from operations and non-GAAP income from operations margin. These non-GAAP financial measures exclude noncash stock-based compensation charges and additional FICA and related payroll tax expense incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. Commvault believes that these non-GAAP financial measures are useful metrics for management and investors because they compare Commvault’s core operating results over multiple periods. When evaluating the performance of Commvault’s operating results and developing short and long term plans, Commvault does not consider such expenses. Although noncash stock-based compensation and the additional FICA and related payroll tax expenses are necessary to attract and retain employees, Commvault places its primary emphasis on stockholder dilution as compared to the accounting charges related to such equity compensation plans. In addition, because of the varying available valuation methodologies, subjective assumptions such as volatility, which are outside of Commvault’s control and the variety of awards that companies can issue, Commvault believes that providing non-GAAP financial measures that exclude noncash stock-based compensation expense and the additional FICA and related payroll tax expenses incurred on stock option exercises and vesting of restricted stock awards allow investors to make meaningful comparisons between Commvault’s operating results and those of other companies.
There are a number of limitations related to the use of non-GAAP income from operations and non-GAAP income from operations margin. The most significant limitation is that these non-GAAP financial measures exclude certain operating costs, primarily related to noncash stock-based compensation, which is of a recurring nature. Noncash stock-based compensation has been, and will continue to be for the foreseeable future, a significant recurring expense in Commvault’s operating results. In addition, noncash stock-based compensation is an important part of Commvault’s employees’ compensation and can have a significant impact on their performance. Lastly, the components Commvault excludes in its non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP financial measures.
Commvault’s management generally compensates for limitations described above related to the use of non-GAAP financial measures by providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Further, Commvault management uses non-GAAP financial measures only in addition to, and in conjunction with, results presented in accordance with GAAP.
Non-GAAP net income and non-GAAP diluted EPS. Non-GAAP net income excludes noncash stock-based compensation, and the additional FICA and related payroll tax expenses incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. In addition, non-GAAP net income and non-GAAP diluted EPS incorporate a non-GAAP effective tax rate of 37% in fiscal 2016 and fiscal 2015.
Commvault anticipates that in any given period its non-GAAP tax rate may be either higher or lower than the GAAP tax rate as evidenced by historical fluctuations. On an annual basis, the GAAP tax rate over the past three fiscal years was 34% for fiscal 2015, 37% for fiscal 2014 and 35% for fiscal 2013. The current fiscal year GAAP tax rate is projected to be higher than the rate in recent fiscal years because unfavorable permanent differences are estimated to make up a greater percentage of estimated GAAP pre-tax income. In addition, Commvault’s cash tax rate has been lower than its GAAP tax rate in recent fiscal years. The cash tax rate over the past three fiscal years is estimated to be 26% for fiscal 2015, 18% for fiscal 2014, and 12% for fiscal 2013. Cash taxes paid in fiscal 2016 are projected to be less compared to fiscal 2015 and fiscal 2014. Commvault defines its cash tax rate as the total amount of cash income taxes payable for the fiscal year divided by consolidated GAAP pre-tax income.
Commvault measured itself to non-GAAP tax rates of 37% in fiscal 2015 and will continue to measure itself to a non-GAAP tax rate of 37% in fiscal 2016. Commvault believes that the use of a non-GAAP tax rate is a useful measure as it allows management and investors to compare its operating results on a more consistent basis over the multiple periods presented in its earnings release without the impact of significant variations in the tax rate as more fully described above. Over the long term Commvault expects its cash tax rate to align with the non-GAAP tax rate. Non-GAAP EPS is derived from non-GAAP net income divided by the weighted average shares outstanding on a fully diluted basis.
Commvault considers non-GAAP net income and non-GAAP diluted EPS useful metrics for Commvault management and its investors for the same basic reasons that Commvault uses non-GAAP income from operations and non-GAAP income from operations margin. In addition, the same limitations as well as management actions to compensate for such limitations described above also apply to Commvault’s use of non-GAAP net income and non-GAAP EPS.
Conference Call Information
 Gartner, Magic Quadrant for Enterprise Backup Software and Integrated Appliances, Dave Russell, Pushan Rinnen, Robert Rhame, 15 June 2015
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Safe Harbor Statement
©1999-2015 Commvault Systems, Inc. All rights reserved. Commvault, Commvault and logo, the “CV” logo, Commvault Systems, Solving Forward, SIM, Singular Information Management, Simpana, Simpana OnePass, Commvault Galaxy, Commvault Edge, Unified Data Management, QiNetix, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, Recovery Director, CommServe, CommCell, IntelliSnap, ROMS and CommValue, are trademarks or registered trademarks of Commvault Systems, Inc. All other third party brands, products, service names, trademarks, or registered service marks are the property of and used to identify the products or services of their respective owners. All specifications are subject to change without notice.
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