Commvault Systems's (NASDAQ:CVLT) Q2 Sales Top Estimates, Provides Encouraging Quarterly Guidance

Kayode Omotosho /
2023/10/31 7:52 am EDT

Data backup provider Commvault (NASDAQ:CVLT) reported Q2 FY2024 results topping analysts' expectations, with revenue up 6.88% year on year to $201 million. Guidance for next quarter's revenue was also better than expected at $208 million at the midpoint, 1.27% above analysts' estimates. Turning to EPS, Commvault Systems made a non-GAAP profit of $0.70 per share, improving from its profit of $0.10 per share in the same quarter last year.

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Commvault Systems (CVLT) Q2 FY2024 Highlights:

  • Revenue: $201 million vs analyst estimates of $195.2 million (2.96% beat)
  • EPS (non-GAAP): $0.70 vs analyst estimates of $0.64 (8.95% beat)
  • Revenue Guidance for Q3 2024 is $208 million at the midpoint, above analyst estimates of $205.4 million
  • The company reconfirmed its revenue guidance for the full year of $817 million at the midpoint
  • Free Cash Flow of $40.1 million, similar to the previous quarter
  • Gross Margin (GAAP): 81.2%, down from 82.8% in the same quarter last year

"Our Q2 total revenue growth accelerated, driven by our hyper-growth SaaS platform, and we delivered robust operating margin leverage," 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 Storage

Data 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 Growth

As you can see below, Commvault Systems's revenue growth has been unimpressive over the last two years, growing from $177.8 million in Q2 FY2022 to $201 million this quarter.

Commvault Systems Total Revenue

Commvault Systems's quarterly revenue was only up 6.88% year on year, which might disappoint some shareholders. However, its revenue increased $2.85 million quarter on quarter, a strong improvement from the $5.33 million decrease in Q1 2024. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that Commvault Systems is expecting revenue to grow 6.63% year on year to $208 million, improving on the 3.61% year-on-year decline it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 4.53% over the next 12 months before the earnings results announcement.

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 $40.1 million in Q2, down 18.8% year on year.

Commvault Systems Free Cash Flow

Commvault Systems has generated $174.1 million in free cash flow over the last 12 months, an impressive 21.7% 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 Q2 Results

With a market capitalization of $2.86 billion, Commvault Systems is among smaller companies, but its $283.3 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.

It was good to see Commvault Systems beat analysts' revenue and EPS expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates while full year revenue was reconfirmed. On the other hand, its gross margin fell. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $65.28 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.

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The author has no position in any of the stocks mentioned in this report.