Good morning ladies and gentlemen and welcome to CommVault Second Fiscal Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Following today's presentation instructions will be given for the question-and-answer session. At this time for opening remarks and introductions I would like to turn the call over to Mr. Michael Picariello, Director of Investor Relations. Please go ahead sir.

Good morning. Thanks for dialing in today for our second fiscal quarter 2016 earnings call. With me on the call are Bob Hammer, Chairman, President and Chief Executive Officer; Al Bunte, Chief Operating Officer; and Brian Carolan, Chief Financial Officer. Before we begin, I would like to remind everyone that statements made during this call, including in the question-and-answer session at the end of the call, may include forward-looking statements including statements regarding financial projections and future performance. All of these statements that relate to our beliefs, plans, expectations or intentions regarding the future are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Actual results may differ materially due to a number of risks and uncertainties such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing, and sale of software products and related services and general economic conditions. For a discussion of these and other risks and uncertainties affecting our business, please see the risk factors contained in our Annual Report in Form 10-K and in our most recent quarterly report on Form 10-Q and in our other SEC filings and in the cautionary statement contained in our press release and on our website. The company undertakes no responsibility to update the information in this conference call under any circumstance. In addition, the development and timing of any product release as well as any of its features or functionality remain at our sole discretion. Our earnings press release was issued over the wire services earlier today and has also been furnished to the SEC as an 8-K Filing. The press release is also available on our Investor Relations website. On this conference call, we will provide non-GAAP financial results. A reconciliation between the non-GAAP and GAAP measures can be found in table four accompanying the press release and posted on our website. This conference call is also being recorded for replay and is being webcast. An archive of today's webcast will be available on our website following the call. I will now turn the call over to our CEO and President, Bob Hammer.

Thank you, Mike. Good morning everyone and thanks for joining our fiscal second quarter FY 2016 earnings call. The headlines for the quarter were, we had a phenomenal sequential revenue growth for the quarter. Our sales teams particularly in Americas executed well given the funnel we had going into the quarter. Solid execution across the business combined with careful management of expenses enabled us to achieve better than expected earnings per share. Sales funnel grew significantly during the quarter driven primarily by improvement and large enterprise deals in the Americas. As a result we now have a larger funnel which puts us in a better position to achieve our expected second half FY 2016 improvements in revenues and earnings. We have added substantial staff sales capacity in the Americas under a strength and management team and structure, which should be sufficient to meet our FY 2016 objectives. The next generation of our market leading solutions portfolio including our data platform was released on October 20th putting us in a much stronger competitive position and increasing our available market. I will discuss this release in more detail later on in the call. We continued to make progress on our transformation and have now built the foundation to accelerate revenue and earnings growth. Let me briefly summarize our Q2 financial results. Total revenues were up 1% sequentially. Software revenues were up 2% sequentially. EBIT margin was 7.7%, EPS was $0.15 a share. We repurchased approximately 35 million of our common stocks since the last earnings call. We will remain opportunistic with stock repurchases. We ended the quarter with approximately 400 million of cash in short-term investments. Let me now provide you an update on our business transformation that we call Commvault Next. Our transformation has been driven by changes in the market…

Thanks, Bob and good morning everyone. I will now cover some key financial highlights for the second quarter of fiscal 2016. The strengthening of the U.S. dollar compared to certain foreign currencies had a significant impact on the year-over-year results for the quarter. Foreign currency movements had a minimal impact on a sequential constant currency basis. I will state our as reported non-GAAP results first and also state the year-over-year results on a constant currency basis. Second quarter total revenues were $140.7 million, representing an increase of 1% sequentially and a decrease of 7% over the prior year period. Total revenues were down 1% year-over-year on a constant currency basis. We reported software revenue of $57.6 million, which was up 2% sequentially and down 17% from the prior year period. Software revenue was down 12% year-over-year on a constant currency basis. Revenue from enterprise deals, which we define as deals over $100,000 in software revenue in a given quarter, represented 49% of total software revenue. The number of enterprise deals decreased 6% sequentially. Our average enterprise deal size was approximately $269,000 during the current quarter, up from approximately $250,000 in Q1 2016, an increase of 7%. Americas, EMEA, and APAC represented 63%, 26%, and 11% of total software revenue respectively for the quarter. On a sequential growth basis, Americas software revenue increased 16% while EMEA and APAC declined 14% and 20% respectively. The revenue mix for the quarter was split 41% software and 59% services. Please remember, services revenue is a combination of both maintenance and support revenue and professional services revenue. Services revenue for Q2 was $83.2 million, an increase of 1% sequentially and 2% year-over-year. Services revenue was up 8% year-over-year on a constant currency basis. Our maintenance and support renewal rates remained strong. We added approximately 400…

Thank you, Brian. I wanted to next discuss the market mega trends we are addressing with our Commvault Next transformation and their impact on our new software portfolio and the new common data platform that were announced last week. Mega trends such as the movement of the cloud, increasing demands for innovative business analytics, new requirements for security and compliance, anywhere computing, the explosive growth of data, and the increasing demand for open new infrastructures, hypervisors, data bases, and new technologies in storage and networks had drastically disrupted and reshaped the IT industry and data management. As part of our announcements last Tuesday we highlighted in some detail a series of emerging customer needs that grew out of the mega trend shaping our industry. Our in depth understanding of the key and emerging customer needs has resonated well with the industry analysts, customers and partners that we have spoken with, and has shaped the direction of Commvault Next in the development of our next generation solutions portfolio. I have provided a perspective earlier in the call on our Commvault Next transformation, how it enabled us to build a new strategic foundation and how it positions us well to meet the needs for our customers in this rapidly changing environment. Now I’d like to spend a few minutes on the latest release of our software. We’ve been working diligently over the past two years on the 11th version of our data platform in integrated solution portfolio to ensure CommVault innovation would be distinguished in the market for the breadth of our solutions and the depth of our innovation. The new software will be seamlessly upgradeable on our like-to-like basis for existing CommVault Version 8 through Version 10 customers and will be easier to consume for a new customers across a wide…

Thanks Bob. Operator can we please open the line for questions.

Thank you. [Operator Instructions]. Our first question is from Joel Fishbein with BTIG. Your line is open.

Good morning guys. Bob, one for you and Brian a follow up I guess for you. Bob can you just talk a little bit about the partnerships that you’ve had in with like Microsoft and some of the other big guys and how they are progressing? Along with that I guess people are also worried that there would be some kind of pause in spending with the next generation of Simpana coming out but it sounds like that’s not the case considering what you are seeing in the pipeline?

The next generation is really a catalyst for growth versus a pause because as I mentioned in the call I mean in most enterprise customers like almost all are looking to start to move to the cloud for difference out there. These cases or workloads or move to new infrastructures whether its hyper converge, overseeing a significant uptick in customers looking to move to web scale infrastructures which we’re well positioned to do. So customers are understanding that we are leading the industry both from a platform standpoint and now from a standalone standpoint. It gives them confidence to work with us even if they are -- they are first implementing a version in software. So we don’t see that as a pause we see that as a positive catalyst to increase momentum. With regard to partnerships we have been increasingly leveraging our capability particularly to move to the cloud to expand our alliances certainly with Microsoft. What we offer a cloud provider like Microsoft is a seamless as I said earlier. We provide the seamless data layer of indexing and orchestration and storage for customers to write their data too. So as they are migrating from their legacy on premise of the structure to say something like Azure, we provide a common management layer for them to do so. You have got to deploy a data into the cloud and have a common platform for compliance, for legal, for setting pause for some data protection. It makes it seamless for the customer and makes it a lot easier for the customer to move to Azure. And as a result Microsoft has been supporting us extremely well in the marketplace. And it is not only Microsoft, we are seeing that from some of the other cloud vendors as well. As customers move to new infrastructures like hyper converged or to new software platforms based on flash, we have expanded our alliances with companies like Nutanix and Pure. As we move into the healthcare arena there will be a whole series of additional partners and there are other partnerships as a result of development of this platform that I haven't talked about that we will be announcing over the next couple of quarters.

Great. Hey Brian, just a quick follow up on the, their deferred line, there was a decline in the deferred revenue, can you just walk us through what that is?

Sure. Hi Joe, good question. So I think the deferred line, the vast majority of that is maintenance and support revenue. So just from a business standpoint we’re still experiencing very high attach rates to our software sales. We also are experiencing high strong renewal rates as well. So this sequential decline in deferred revenue is driven by a couple of things. One is it has more to do with the trailing four quarter software growth which has been down in recent quarters. Secondly, there is an FX impact to it especially on a sequential basis. And also we had less multi-year renewals showing up this past quarter meaning fiscal Q2. On the flip side we believe that we should see sequential growth in that line for the remainder of FY 2016 based on our higher software revenue growth expectations and also fiscal Q3 and fiscal Q4 tend to be large maintenance and support renewal quarters for us that we should see a rebound sequentially.

Okay, can you quantify the FX impact?

I think it is around $2 million to $2.5 million.

Perfect, thank you so much.

Thank you. Our next question is from Jason Ader with William Blair. Your line is open.

Thank you, hey guys, just first for Brian, just wanted to see if you can give us any quantitative metrics on the growth in the funnel and then for Bob, lot of features in the new platform and you went through them pretty comprehensively, can you give us a sense from the data customers what two or three features are kind of the most impactful and kind of the most needle moving? And then just also Bob just on the public cloud business, you guys haven’t talked about that and we are wondering how significant that is now as a percentage of the software revenue and what kind of growth you are seeing in that area?

Hey Jason, it is Brian. I will answer the first. So we won't give you anything exact on the subtle growth metrics but we will say that it was significant what we saw in Q2. Those trends, the early trends seems to be continuing in fiscal Q3 and I will say that, that's -- it is the best funnel growth we have seen in quite some time.

Okay, thanks. Bob?

Yeah, so Jason I will draw a summary on what is resonating in the market and I am going to let Al jump in as well. From -- in broad scope, the new platform is resonating. It seems that we are the only one that has got this unique platform with these three elements and they are not trivial when you combine your indexing capabilities and your orchestration capability and now you have got basically a universal storage layer across all the different repositories. That is unique in the market. People have tried to do that but there is nobody on software that has done it. So it is not just the support we are getting from Microsoft. I can say there are other cloud providers out there who understand that and how important that is for the right customer to holistically manage that data across these different repositories and I will let Al expand on that. That is one and just data protection alone when you move, now we are grabbing data on the rise, so you are either eliminating or you are reducing your backup windows to zero. You are adding a much more efficient transport enabled to move data across the network a lot more efficiently and as we said dramatically improve our RPL and RTO times. And the fact that everything is a live copy. There is no longer any restore. These copies are production ready all the time no matter where the data is reposed and resides is really resonating well with our customers. From the archive standpoint, the fact that you can very efficiently, cost effectively now have an active archive and when we mean active archive you have the ability for that application to get to a production ready copy, simple and easily, again no matter where it resides you get it. And make sure that there is access to that copy. And then when you get to automation and orchestration and I will let Al expand on this, for things like disaster recovery or depth sets and we are doing that with high automation and new simplified user interfaces, so those kind of things were really resonating well out there and the platform is now open. It is no longer proprietary and you can access data with standing tools. So those are some of the major areas of new functionality that are resonating with our customers. Al why don’t you to take a second here.

Okay, thanks Bob, hi Jason. Yes, Bob had it pretty well nailed this and particularly enterprise customers they come in these days and they are particularly interested in what I call holistic data management. It does mean back up everything, it doesn’t mean protect everything it means manage and create up a secure and make end user accessible most of the data in the organization. It turns out about one third of the data really means protection and backup. The tiers are tier 1 even tier 2 applications out there but people are and more interested in the broader needs of data types out there, number one. As Bob said particularly in the protection quadrant as we think about the so called live services, many of the things we’ve done with replication, many of the things we’ve done with as Bob said live access really, really resonates. It is more of a recovery solution set than more of a traditional protection or even backup kind of capabilities. So those are still there and they are combined to get an optimal RTO RPO capability. And again not really resonates. As Bob said the orchestration element gets a lot of attention from our service providers as well as from the customers. It is one thing to manage the data set particularly in cloud but it is another thing altogether to tie it to compute platforms, applications, current versions, etc and that all takes a fairly high degree of orchestration and there is a lot of demand for that kind of capability. And then lastly again for Bob, the active archive has stretched out to a broader concept here from, you know, archive we traditionally thought of backup datasets that we are now stubbing out for in frequent use into a decent archive. That’s there as well and that’s still popular but now we’ve added the idea that brings a lot of different data types into the content store or the platform without backing it up primarily for the interest of management accessibility, search, classification, etc. So those are the big ones I hope I remember them all.

Yes.

There are 50 some million names there Jason, I can't remember them all.

And there is one other that is resonating with almost everyone of our beta customers and that is since we do all that and we can manage data where it lives without moving it, whether it is on a machine or its in a social network or its in a database somewhere. So we can go out and understand an index that data without moving it and when customer figure out we could do all that plus we have context in all the other database stores it then now becomes the perfect platform for business analytics, processes say Microsoft's BI engine or potentially downstream. You could see Watson or some of these other more sophisticated business analytics capabilities plus our own and we built a number of BI type applications for customers and to do things that they couldn’t do before. But the other thing that platform provides and that’s both on the data and log since we have built in log analytics as well. You can tie real time historical and trend and provide a more comprehensive business analytics capability then it could without a platform like this. So it gives you some idea why there is a lot of excitement out there and why this is so unique in the market.

And Bob just to wrap up, this discussion was very helpful. I guess would you look at this as more of a you guys had a few features that you needed to add, let's say with other players in the market have had and therefore this is kind of a catch up to the platform given the changes in the market, cloud, live copy, etc. Are you massively differentiated now versus the competition, how do we think about your competitive position relative to some of the other players out there?

So two years ago I mean lot of companies have gotten disrupted. And I said on this call two years ago we had to change fundamentally everything we are doing. So first of all as I said in the call you have to be relevant and provide highly differentiated value both in the cloud and for SaaS types of applications. So, you got to start there. So, that requires fundamental architectural changes to the platform to enable all that to happen. So, some of this is leapfrog, the other objective was to your point there were innovative competitors coming into the market on a standalone basis that developed some pretty unique positions. So, our objective was one, leapfrog the whole platform and two, make sure relative to any standalone competitive that is out there, I don’t care whether they were in web-scale or they are in next generation data protection, or they are in active market, it really didn’t matter. They are indicative to make sure that our platform and as a standalone we were clearly highly differentiated investment class. So what you have got emerging here is the best platform and as we shape our standalone products you will have the best standalone product and the most innovative in the industry all integrated and linked to the best platform in the industry. Those were clearly our objectives, that is what we are doing. And then you take that and expand that into unique solutions in vertical markets like healthcare which I didn’t spend a lot of time on the call. But there is massive amount of technology in that solutions set and it is pretty broad that is coming out in the March quarter. Now you start to reposition the whole company and become a lot more relevant and overall we have all these disruptive but technological changes as well as I mentioned the changes being driven by M&A. So that is the thing that sums it up for you.

Okay, thanks.

Thank you. Our next question is from Brent Bracelin with Pacific Crest Securities. Your line is open.

Thank you. One, for Bob and a follow-up for Brian. Bob, just on Version 11, can you let us know when the dot one release is coming, is that kind of first half of calendar kind of 2016. And then as you think about a traditional upgrade cycle, this clearly sounds like there is a lot of value you are adding, it is unique. It seems that will also be implemented in a longer time fashion than a typical upgrade. So, walk us through when dot one release is and how long the implementation cycle could be as you get customers trying to upgrade from V10 to V11?

Let's be clear that the product is GA as we speak. We just -- that is typical with CommVault. We don’t release it to the open market until we go through a couple of months of cycle. We call it control release. So the product is available today. The broader general release will be December and as Al puts it you can open this up, it is coming out in surges. So the version dot one is available as we speak, dot two with a whole bunch of other additional enhancements is actually going to be available to the market very early in 2016. The dot three will be available either later on in Q in the March quarter or early in the June quarter. So, we are moving extremely fast with a massive amount of technology and move into the market and the reason Al has -- the team has broken this up into he calls them surges is because there is so much technology coming out that is just getting the messaging right, the monetization and the marketing right around as we had to break it up. So, Al can give you a little bit more color here. But this is just the beginning.

Yes, that really nails it Brent. I have even got the feedback by the way that with all of the press releases and all of the public announcements we have done over the last week or so that people are just getting in now. So lot of information out there, lot of messaging, lot of content. I mean as Bob said, the feedback is really good. He nailed it in terms of we are RTM at this point. We move it into an earlier controlled release mode for several months here and we will let the clutch out in January. Not only upgrades but full availability. And one other point in this, I don’t want even though this is a big piece of code, it is extremely easy and manageable to upgrade. We’ve done lots of things on that through the years as you probably know. This can be run part V10 part new release, all kinds of variations on that. It is all automated. Deals with changed management, hybrid environments, and cloud and not cloud, etc. So that is a really slick part of this whole new release.

Okay, very helpful. And then Brian just a quick follow up for you, you talked about having the best funnel growth in years, if I look back your revenues have been below kind of consensus. I know you don’t guide but revenue has been below consensus six out of the last eight quarters. As you think about this funnel relative to now a major new release what's the risk relative to closing the funnel as you think about all that customers have today just year in and also layering on top of change and maintenance pricing, how should we kind of think about the conversion of that funnel growth in years?

Well that’s always risk involved however I'd say that the funnel where we see it today puts us in a better position to achieve those objectives in the second half or sequential growth both Q3 and Q4, and we are comfortable with the current street total for a consensus revenue for the year.

Okay, fair enough, thank you.

Brent just a clarification from me. Brian is right. I mean we took a number of steps and we put a plan again to get momentum back in the business. What one was V10 and to segregate in a platform of standalone products. Second, we had to re-staff and restructure the Americas which was a massive task. And you put those two together and we put a plan together for a substantial growth in the second half of 2016. It was a risk to test that. What we have now is validation that we achieved both those objectives and we got a required funnel growth now to achieve our second half FY 2016 objectives. We are not saying it is going to be better than what we said before but this was a pretty significant shift between the first half second half in terms of growth both top and bottom line and now we are in a position to achieve that which is really gratifying for the whole team here. And we can start building momentum on top of it but as you said, you still got to convert that funnel. And as I said on the call we still have to deliver those that top and bottom line. Our track record hasn’t exactly been still doing that. We -- until we do it there is still risk attached to it but I can tell you this is a substantial uptick in our ability just in terms of the number of accounts we have in front of us and where these accounts are in the closing cycle. So, looks pretty good but as we said on the call we still got work to do.

And we generally plan for a conservative close rates by the way.

Thank you and our next question is from Abhey Lamba with Mizuho Securities. Your line is open.

Yes, thanks. Well continuing on the topic of funnel, when can we see some sort of a hockey stick from the substantial growth that you are talking about, is this something we are looking for second half of fiscal 2017 or can it happen earlier than that?

Well if you look at the numbers between first half of 2016 and second half that’s a hockey stick. No matter how you look at it it’s a big hockey stick. And what we need to accomplish in December and March quarters and obviously we do that then we continue to build funnel and you start to leverage the impact of Version 11, then you got a new company sitting here but the hockey stick starts now. Right now.

Got it and Brian when we are talking about maintenance price realignment, has this cycle pulled the entire install base or will it be a headwind for few more quarters? Also was that a factor in your deferred revenue of sequential decline over the last couple of quarters?

Good questions. So we’ve been at this for a while at the enterprise segment of the market. So I think I’d be talking about this for a few quarters now. So that comp incorporates most of our revenue base and we have been kind of systematically going after those customers and restructuring more appropriate. We will now take it down to "kind of mid to smaller end". So this is lower percentage of the overall base in terms of dollars but most of that was in front of us. So, if you listen to what I was saying is that this is going to flatten out. It will be kind of flat to very slightly up on the services line for the remainder of this fiscal year and we would expect that to continue into the early part of next year if not throughout FY 2017. So, most of our growth over the next couple of quarters is going to come from the software line.

Thank you and our next question is from Andrew Nowinski with Piper Jaffray. Your line is open.

Alright, good morning guys. Congrats on the progress you have made so far. I guess I appreciate the color and the indexing and orchestration of data in the public log but can you just walk us through the revenue and pricing dynamics in high rate environment, how you are selling capacity based licenses and cost when that might move data to Azure and how you monetize that?

Yes, those are really good questions Andrew. I mean, if you wanted to be flipped I can say building it is one thing, selling it, monetizing and selling it is a completely different story. So, to keep it simple, on the monetization on way of one of this, it is and I will let Al expand on it, certainly the next generation data protection with a live copy, the mutated transport and things like that, that are relevant both on premise and in the cloud have massive use of both functionality and cost saving benefits. That is where early the biggest monetization is right in front of our real house. Second, you can monetize archive and the big benefits to the customer is there. And it is a much more expanding of use case than we had with our archive solution. And third, is we start to move our standalone to start to combine very sophisticated orchestration and management of data. And the cloud, the rifle shot there to start is DR. But you can take DR and move to data. So what Alan and team are trying to do here is to be -- to make it a lot -- take all this massive amount of technology and move it into, I call it easy to understand monetizable chunks and build it out from there. And on top of that I can assure you that for many large enterprises when you start to look at this platform that is holistic across these different repositories, it is resonating really well and that gives you a big mega deal either for your commercial accounts or your big cloud providers. So, the whole area of remonetization, repricing, moving from perpetual to subscription models those kind of things that is all part of the evolution as we move forward here. Al, if you want to…

No, that is really good Bob. I think that nails it all. I think the important thing to remember Andrew is we are trying to not confuse our partners and our marketplace. I think as Bob said we are pretty clear on where we want to take this eventually but we have such a huge part of our base in monetization today tied around CLA bundles if you will that we will be somewhat careful on moving away from that in like a real hard right turn there. So Bob, plated out really carefully.

Yeah, Al just made a good point. Our older pricing models are not going away. We are giving customers alternatives but we are not eliminating those other models that the market is used to from our price list.

Yes.

Thank you. [Operator Instructions]. Our next question is from Srini Nandury with Summit Research. Your line is open.

Alright, thank you for taking my call. Just basically I was wondering you guys have all these different pricing models and then you have all the solution bundles and now you also have this new upgrade. So have you heard anything from your customers saying that okay, well now we have these upgrade cycle coming and we have bought all the software which is part of it we use, part of we don’t use, so is there some pressure on your pricing to come down so that people will think of buying only the solution bundles they are going to use?

Yes I’ll just keep that simple but we work closely with our install base to make sure that they are aligned with the market and that they are getting full value from where they purchase from us and we make adjustments accordingly. So that’s an ongoing process that we manage. So the answer is do customers ask those questions, yes. And do we work with them to resolve issues as they arrive and the answer is yes to that as well.

Perhaps we have an assessment program where we go in with our services team, we are starting to hear that are they really utilizing the features they have, are they operating it correctly, and almost always we find room for improvement. So we think that seriously not so much they are not using things but are they getting the full value out of what they bought. So that’s part of our core DNA here.

Thank you. Our next question is from Aaron Rakers with Stifel. Your line is open. If your phone is on mute please unmute your phone.

Sorry, can you hear me guys.

Yeah Aaron, how are you?

Okay, sorry about that. I have one question and one follow up, on the first question, as you kind of see the pipeline funnel build and you look to see the closure rates of data, I am curious if you could talk to the sales capacity that you have in place relative to say a year ago and kind of just talk a little bit about where you stand. I think the last couple of quarters you’ve had some attrition challenges just stabilizing the sales force and what kind of capacity you now have in place to drive those closures of that funnel going forward?

So in general we have enough capacity to achieve the in place today to achieve our second half FY 2016 and Q1 FY 2017 objectives, that’s already in place. To give you a perspective on that, we actually had negative sales capacity in the Americas from the early winter through early spring of last year. So one of the reasons our software decline is because as we are going through the restructuring we were not hiring and to your point Aaron higher attrition. So now what we have particularly in the Americas is we’re basically -- well we said it pretty clearly, we have -- clearly we have had massive hiring there. So the difference is we went from negative sales capacity towards a substantial new capacity, it is already in place and our attrition is down. So the combination of that plus the moves we made in our product and our distribution in the Americas in particular we had dramatic funnel growth, it’s that combination. So that is already in place, what needs to happen now was the point that we made earlier we got to convert that funnel and we got to deliver the revenue and earnings associated with it. And then now we have to build and we have time to do this but aggressively start to build and reposition our value proposition in the market with the 11. But we are doing that with wind to our back and with products are aligned with the way the market is moving versus the other way around. So it is substantially different. And the strategy we embarked on was expensive and had a lot of risk associated with it. Now we are seeing our set points in our foundation everything is becoming a lot clear and now we can start to manage the business the way we did for the first seven years after we went public with on top of a much firmer foundation. So -- but I don’t want to minimize the amount of work we have to do in front of us either but certainly in a much stronger position to do it now.

Okay and then as a quick follow up Brian if I can, as you look out longer term and you have everything in place and now you start to execute on the model from a revenue growth perspective, how do you guys think about the longer-term operating profitability or operating margin that you think this company should be generating?

Our goal has always been to have a balanced strategy of both top line revenue and earnings growth overtime. So, as we said, we believe that we are going to improve sequentially both top line and on an EBIT margin perspective for the remainder of this year and our goal is to continue to expand that.

So the goal is to get back into the mid 20s

Mid-20s yes.

And those are the models that we have laid out. We are talking about mid 20s operating margins. But Brian indicated earlier not now we are in a fine line of balance and how do you balance your OPEX growth against driving enough top line to get that operating margin expansion. And it is pretty tricky. And right now we are really controlling OPEX and trying to size revenue growth, it is not easy. So we have got this place pretty hollow [ph], we got a set point, a foundation, now we can start managing it the way we did seven or eight years ago. But we can tell you this is not an easy exercise. But right now it is pretty well screwed down and we want to get this momentum going and then we will incrementally build on it, that is how we built the company in the first place. So, that is where we are but yes, mid 20s operating margins is doable. But it is downstream over a few years. Of course it will take us a few years to do that. And the other point that makes it a bit more difficult Aaron is that your maintenance revenue growth does not catch up for four or five quarters because you have had basically flat license revenue growth going back. So, we can -- what our shareholders and what you guys all look at near-term is the acceleration of license revenue growth and because the maintenance, the maintenance level will catch up and so that is what we are focused on. License revenue growth in that controlled expense environment. That is basically where we are.

Thank you and our next question is from Greg McDowell with JMP Securities. Your line is open.

Great, thank you very much. Just one quick question, it has to do with your capital allocation strategy, it looks like you started repurchasing shares again and increase the size of the program. So, I guess probably one of the question is how opportunistic do you plan to be in taking advantage of the present share price and part two of the question is really any update on M&A and putting some of that capital to work, thank you?

So, clearly investing in probable stock is a good thing and we are on a path now for growth. We will be opportunistic. We want to maintain a strong balance sheet and we want to make sure we get -- one of the places we can get a return is buying our own stock and we will balance that. From an acquisition standpoint to be really clear we don’t plan to have any major acquisition in the near future. But as we said in the last call there could be some very small selective tuck in acquisitions related to our verticalization. If we make those, those will be high return type, high leverage transactions that are where there is really good strategic fit. I can tell you from past experience and Al and I have not been inquisitive but our last company we didn’t miss one. Meaning we made them and they all were extremely successful and they are all kind of tuck in acquisitions that worked with high pay back. And that would be our strategy going forward. So, nothing major but you could see some tuck in acquisition going forward here tied to our verticalization.

Thank you. Our next question is from Michael Turits with Raymond James. Your line is open. If your phone is on mute please unmute your phone.

Yeah, I have unmuted, sorry guys, thanks. Good to see stabilization in the quarter. One clarification, Bob you said that you are looking for year-over-year license growth in fiscal fourth quarter 2016 in March quarter?

Yes, what Brian said there is definite potential for good year-on-year license revenue growth in the March quarter.

Okay, and do you have any thoughts just directionally on operating margins in fiscal 2017, should we think and be thinking of it as flat operating percentage year or up a little bit, any general direction?

Well, we haven't had a plan but we want to refine that a bit and we’ll definitely give you more color on that on our next earnings call. But clearly objective as we said on the call is to achieve both good solid license revenue growth with good solid operating margin expansion in FY 2017. And we’ll give you more color on that on the next call. But that’s where our goals are.

Okay, that’s good. Those were my follow up thanks guys.

Thank you and our next question is from Rajesh Ghai with Macquarie. Your line is open.

Thanks, congrats on the launch of the new platform. I am completely confident that the technology is quite compelling. My question is really around what I see as a potential headwind created by some of your younger competitors that CommVault is quotes legacy. How do you address that perception which I believe could be the headwind, the most important going forward and how do you see your re-staff and restructured sales force at this point are they ready to take this new platform and make it a success?

One, I am really confident in the sales team. It is just up to us to arm them well with clear messaging and educate them but as far as the capability of that team it is outstanding and I have tremendous confidence in it. In regard to repositioning the company, it starts with if we have as in more innovative products in almost any of these startups and we have the ability to tie those standalone solutions in and fully integrate them into the world’s best data platform. We currently have a technology advantage versus these startups. Now getting that and it may take us three or four months to get all the element so that there is no question at the best in class whether it’s UI or anything else. Or whether it’s traditional or whether its web scale. I mean across the board we are confident on where we are technically. As far as marketing team now is working really hard to make sure that the market understands that and we reposition our image from what was CommVault to Commvault Next and move us off this legacy. But it starts with if you got the best technology out there and it's recognized by customers and analyst and you have it validated in the market and you now have a revenue or momentum tied to it. And then you work on the repositioning from a marketing standpoint as our work going in that, our position will shift. And the reason we are feeling good about it, it always starts with the product and value prop and now we are ahead of the curve versus behind it and it makes that job easier. But to your point it is a key issue. It is being addressed and it is an issue we understand and agree with that needs to be addressed.

One additional point Rajesh is, the legacy doesn’t always have a negative computation. It could be positive particularly in our enterprise environment. By that I mean as we are working with these guys on newer products or newer feature sets or functions let's say migrating a pilot data, it is usually our history of being able to deal with big scale dynamically and our flexible architecture that even though we haven't proven the specific solution, big customers are willing to go with us on the approach just simply because of our legacy. So again it works for us but I don’t mean to talk around because you and Bob are right on it’s an image issue but it does work for us particularly in enterprise.

Al’s making a really good point and we’ve got now it is not the best -- one of the best enterprise sales forces in the world right now in our industry. And that sales -- our whole solution architect and TS organization startups did not have that. And so we come in and work with a customer to define a solution. We can come in a lot more comprehensively than most of the startups. And now do we have that going for us but now we are leading technology and solutions to go along with and we are broadening at our alliance partnerships to align with these trends in the market to bring in more horsepower from stronger set of alliance partners as well.

Thank you and our next question is from Brad Zelnick with Jefferies. Your line is open.

Great and thanks so much for fitting me in guys and very exciting to hear all the developments around the next gen platform, it is pretty exciting time for CommVault. My question following up on an earlier question around deferred revenue and the response completely makes sense. We can see the FX impact and obviously the license being depressed eventually hits that line too. But it just also brings to question the maintenance pricing realignment and the renewal rates, can you just give us an update on how that’s going, how the pricing realignment is being received by the market and also to let us know the renewal rates are still healthy and doing well?

Hi, Brad its Brian. So there is one other aspect I think I mentioned was less multi-year renewals that showed up in this past quarter and that’s just a function of whether or not companies want to spend but or not on a multi-year basis but that was another factor to the sequential decline. So in terms of the maintenance pricing I would say that a lot of it's behind us at the enterprise level. Again at the mid to lower end of the market we still have a lot more to roll out that will be happening over the next couple of quarters. Then to think a smaller percentage of the overall pie in terms of maintenance support revenue, but probably touches a lot more customers. So there is some risk attached to it but we actually think there is going to be a catalyst for growth beyond the transition and we do think that the maintenance support revenue line will flatten out over the next few quarters. And then once we see rebound, a continued rebound in the top line software growth so maintenance should then follow from there and you will see a rebound in that line as well.

Thank you and our next question is from Ittai Kidron with Oppenheimer. Your line is open.

Thanks, good to see the numbers stabilizing. I just have a couple of questions first with regards to the funnel. Can you give us some color on how much of the funnel is already focused on Version 11 versus Version 10. I am just trying to get a sense of how much kind of mind share you had with customers and again its potential risk in kind of slowing down your momentum? And then the second thing regarding your sales force, I think you have made a comment on the call that you now intent to start slowing down your hiring going forward, just a year ago this was a very big issue for you and you couldn’t hire fast enough and I guess my question is if you have such high confidence in the new platform and return to strong growth on software why slow down the hiring, why not keep going forward. And although it might hurt again margins for a quarter or two it will certainly should lend itself to much better revenue growth in three to four quarter timeframe, so why slow it down?

So your point is well taken. I mean we have had a very aggressive investment strategy here now for two years and the slowing growth by the way is primarily V10. There is some V11 but this is primarily a Version 10 funnel growth. So the issue on yes, we could continue to accelerate hiring and that would be logical but if sometime in all these business you got to realign yourself for a profit expansion and cash flow expansion for lots of reasons. One, this company has got a lot of potential to create a lot of shareholder value going forward. And the way that is done you can say as a public company you got to do it both top and bottom line. And at some point you got to bite the bullet and get those disciplines back in place. And we picked this, this is our time. Now as we move forward, when we validate, we are going to hit these numbers. The funnel looks really good and we are not understating that. It does look extremely promising and we validate that we take this technology which we gotten a lot of feedback but we get the kind of traction we think we are going to get in the market. We will start on a control basis expanding hiring again later on in the fiscal year. So are just bringing it down and we are just bringing it under control and now we want hard validation that we can execute, convert that funnel, and hard validation that we can move the 11 in some market at the kind of rates that we need to move it into and get our channel -- our sales engine to channel partners, customers educated on this. We do all that. You will us selectively start to expand hiring again. So we are running a private equity company in a public market that’s what we are doing.

Thank you and our next question is from Eric Martinuzzi with Lake Street Capital. Your line is open.

Thanks. Wondering, you got growth forecast here sequential for the next couple of quarters from an international perspective, in other words rest of world, what are the risks to executing that in the rest of the world over the next couple of quarters?

EMEA looks quite good primarily because they’ve got their large deals that are keyed up. They have got a good solid funnel after the next two quarters in EMEA and the U.S. APAC for Q3 is okay rate but there is really a lot of restructuring right now in APAC by the way. So the foundation for that outlook is primarily in the U.S. and EMEA and we just hired by the way a very strong new leader in APAC and we will be re-staffing and restructuring that to position them for a strong FY 2017. So that is ongoing as we speak and we are committed to that investment. So -- and we have got some good things going on in APAC as well. But the primary drivers for the large growth over the next two quarters is both the U.S. and EMEA.

Thank you.

Thank you and our next question is from Siti Panigrahi with Credit Suisse. Your line is open.

Thanks for taking my question. Bob you talked about secular disruption from the safe to cloud and when it comes to cloud Amazon AWS is a big story line in that phase. And they are now they talked about focusing now on enterprises. And you also talked about how you position against as your but one question we keep getting is how CommVault is going to leverage against and train cloud, how you are going to monetize the AWS trend, could you give some color on that?

Yes, I mean I think what we are saying is that we can do things with data across in enterprise and leverage that AWS platform and their tools to be quite right. As they build tools we integrate them. But any enterprise if you are going to manage compliance, legal, and business analytics just doing it in AWS particularly as companies are migrating you can't get control, an honorable control of those kind of functions and doing it in silos. And by putting our platform in so if we install that in AWS on a virtual basis when the app is up there or its on premise you are writing to our virtual storage player. So all the indexing attributes, access, securitization you really are leveraging -- maybe leverage at the gross functionality it becomes holistic and common across that. The other thing that these platforms can't do, we had a lot of discussion with Microsoft on this and some of the others on this, is they can’t manage data where data lives. So if you are dealing with machines or you are dealing with basic structures that maybe sitting in somebody else's cloud or in some on premise web scale environment you are not going to wanting to move all that data back up to AWS, its expensive and unnecessary. We can go out, auto discover it, not move it, take the relevant information for business analytics and then if you want to wrap it up into a longer-term data set you can take the selected items and move them into AWS. So, we don’t compete with AWS or Azure, we compliment those big repositories. Again whether the data is being migrated there or the application and data resides there we can holistically manage that across an enterprise. So, to us it is a big enabler versus what now becomes a big enabler versus the headwind. I hope that is clear to you but that is when we are talking to customers that's what they like about what we have just accomplished.