Data backup provider Commvault (NASDAQ:CVLT) reported results in line with analysts' expectations in Q1 FY2024, with revenue flat year on year at $198.2 million. The company also expects next quarter's revenue to be around $195 million, roughly in line with analysts' estimates. Commvault Systems made a GAAP profit of $12.6 million, improving from its profit of $3.51 million in the same quarter last year.
Is now the time to buy Commvault Systems? Find out by accessing our full research report free of charge.
Commvault Systems (CVLT) Q1 FY2024 Highlights:
- Revenue: $198.2 million vs analyst estimates of $197.2 million (small beat)
- EPS (non-GAAP): $0.72 vs analyst estimates of $0.64 (12% beat)
- Revenue Guidance for Q2 2024 is $195 million at the midpoint, roughly in line with what analysts were expecting
- Free Cash Flow of $37.9 million, down 43.3% from the previous quarter
- Gross Margin (GAAP): 82.1%, down from 82.9% in the same quarter last year
"We're off to a solid start to our fiscal year, highlighted by accelerated subscription revenue momentum and continued operating discipline," said Sanjay Mirchandani, President and CEO.
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 is the lifeblood of the internet and software in general, and the amount of data created is growing at an accelerating pace. Likewise, the importance of storing the data in scalable and efficient formats continues to rise, especially as the diversity of the data and associated use cases expand from analyzing simple, structured data to high-scale processing of unstructured data, images, audio and video.
As you can see below, Commvault Systems's revenue growth has been over the last two years, growing from $183.4 million in Q1 FY2022 to $198.2 million this quarter.
Commvault Systems's quarterly revenue was only up 0.09% year on year, which isn't particularly great. On top of that, the company's revenue actually decreased by $5.33 million in Q1 compared to the $8.4 million increase in Q4 2023. This situation is worth monitoring as Commvault Systems's sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.
Next quarter's guidance suggests that Commvault Systems is expecting revenue to grow 3.69% year on year to $195 million, slowing down from the 5.75% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 4.48% over the next 12 months.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Commvault Systems's free cash flow came in at $37.9 million in Q1, up 75.7% year on year.
Commvault Systems has generated $183.4 million in free cash flow over the last 12 months, an impressive 23.3% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.
Key Takeaways from Commvault Systems's Q1 Results
With a market capitalization of $3.43 billion, Commvault Systems is among smaller companies, but its $274.6 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
This was mainly an in-line quarter for CVLT. It was good to see strong free cash flow, on the other hand, its guidance for next quarter was a little concerning. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. Investors were likely expecting more, and the stock is down 2.54% after reporting, trading at $76 per share.
So should you invest in Commvault Systems right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned in this report.