Commvault Systems (NASDAQ:CVLT) Q3: Beats On Revenue, Provides Optimistic Full-Year Guidance

Full Report / February 20, 2024

Data backup provider Commvault (NASDAQ:CVLT) reported results ahead of analysts' expectations in Q3 FY2024, with revenue up 11.1% year on year to $216.8 million. The company also expects next quarter's revenue to be around $212 million, slightly above analysts' estimates. It made a non-GAAP profit of $0.78 per share, improving from its profit of $0.62 per share in the same quarter last year.

Commvault Systems (CVLT) Q3 FY2024 Highlights:

  • Market Capitalization: $3.57 billion
  • Revenue: $216.8 million vs analyst estimates of $208.1 million (4.2% beat)
  • EPS (non-GAAP): $0.78 vs analyst estimates of $0.73 (6.7% beat)
  • Revenue Guidance for Q4 2024 is $212 million at the midpoint, above analyst estimates of $210.2 million
  • Free Cash Flow of $42.63 million, similar to the previous quarter
  • Gross Margin (GAAP): 82%, in line with the same quarter last year

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.

In today’s digital economy, companies rely on data to predict customer behavior, guide operational efficiency, and drive corporate strategy. The trouble is, your data grows, morphs, and fragments – digital bits and bytes in a constant state of movement and evolution. And data moves from on premise data centers to the cloud and back. Corporate data needs to be protected in case of disasters or from cyber criminals. And it needs to be done in a cost effective and easy to use manner.

Commvault Intelligent Data Services help enterprises drive greater efficiency by transforming how they protect, store, and use data. Commvault’ offerings are organized into three categories - Data Protection, Data Insights and more recently Storage. All of its products operate through a single simple to use interface on the Commvault Command Center, where IT professionals identify content and data they want to protect, and run automated backups. In 2020 Commvault acquired Hedvig and Metallic to expand their storage capabilities to include public cloud architectures, containers, and virtual machines.

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.

Commvault’s public competitors include IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), and VMware (NYSE:VMW) while its private company rivals include Cohesity, Rubrik, Veeam, Veritas Technologies, Arcserve, and Acronis.

Sales Growth

As you can see below, Commvault Systems's revenue growth has been unimpressive over the last two years, growing from $202.4 million in Q3 FY2022 to $216.8 million this quarter.

Commvault Systems Total Revenue

This quarter, Commvault Systems's quarterly revenue was up 11.1% year on year, above the company's historical trend. We can see that Commvault Systems's revenue increased by $15.81 million quarter on quarter, which is a solid improvement from the $2.85 million increase in Q2 2024. Shareholders should applaud the re-acceleration of growth.

Next quarter's guidance suggests that Commvault Systems is expecting revenue to grow 4.2% year on year to $212 million, improving on the 1.2% year-on-year decline it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 3.7% over the next 12 months before the earnings results announcement.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Commvault Systems's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 82% in Q3.

Commvault Systems Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.82 left to spend on developing new products, sales and marketing, and general administrative overhead. Significantly up from the last quarter, Commvault Systems's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

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 $42.63 million in Q3, up 45.1% year on year.

Commvault Systems Free Cash Flow

Commvault Systems has generated $187.4 million in free cash flow over the last 12 months, an impressive 22.9% 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 Q3 Results

It was good to see Commvault Systems beat analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $81.98 per share.

Is Now The Time?

When considering an investment in Commvault Systems, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We cheer for everyone who's making the lives of others easier through technology, but in case of Commvault Systems, we'll be cheering from the sidelines. Its revenue growth has been very weak over the last two years, and analysts expect growth to deteriorate from here.

Commvault Systems's price-to-sales ratio based on the next 12 months is 4.3x, suggesting that the market does have lower expectations of the business, relative to the high growth tech stocks. While we have no doubt one can find things to like about the company, and the price is not completely unreasonable, we think that at the moment there might be better opportunities in the market.

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