Good day, ladies and gentlemen, and welcome to the Q1 2017 Commvault Earnings Conference Call. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Mr. Michael Picariello, Director of Investor Relations. Please go ahead.

Good morning. Thanks for dialing in today for our first quarter 2017 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'd 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, in our most recent quarterly report in Form 10-Q, in 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 it 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. The 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.

Thanks, Mike. Good morning, everyone. Thanks for joining our fiscal first quarter FY 2017 earnings call. We had a solid start to the fiscal year and have entered Q2 with improved momentum and better linearity. I will provide a brief financial overview and update you on why Commvault is strengthening its position in the industry. After discussing these items and before I turn it over to Brian, I'll give you a summary of our FY 2017 financial outlook. After Brian's discussion I will update you on the market, our data platform and an overview of new products and services we plan to release over the next six months. Let me briefly summarize our Q1 financial results. Software revenues were up 13% year-over-year. Total revenues were up 10% year-over-year. EBIT was up 62% year-over-year. EBIT margin was 9.8%, or up 310 basis points year-over-year. EPS was $0.21 per share versus $0.12 in Q1 2016. Cash flow from operations was $24 million. We had good contributions from all three global sales theaters in the quarter. Commvault has once again earned a Leader position in Gartner's coveted 2016 Magic Quadrant for Data Center Backup and Recovery Software. This is for the sixth year in a row. More importantly, we were positioned highest in ability to execute and the furthest in completeness of vision. We believe that this is a clear, undisputed and important validation that Commvault has the right strategy, the right technology and the right people to execute. Gartner is the leading independent industry analyst firm, well respected for its detailed and thorough analysis of industry trends, products and game-changing technologies. Commvault continues to be the industry leader because of our consistent ability to lead the industry in innovation; our single code base that enables our solution to scale and provide data…

Thanks, Bob, and good morning, everyone. I will now cover some financial highlights for the first quarter of fiscal 2017. I will state our as-reported non-GAAP results first and also state the year-over-year results on a constant-currency basis where meaningful. FX did not have a significant impact on sequential results. Q1 total revenues were $152.4 million, representing an increase of 10% over the prior-year period and a decline of 4% sequentially. Total revenues for the quarter were up 11% year-over-year on a constant-currency basis. For Q1 2017 we reported software revenue of $63.9 million, which increased 13% year-over-year on an as-reported basis and 15% on a constant-currency basis. Sequentially, software revenue declined 13%. We did see a $1.4 million sequential increase in deferred software revenue, primarily related to software tied to our Managed Services SaaS business, which serves as early validation of these new offerings. Revenue from enterprise deals, which we define as deals over $100,000 in software revenue in a given quarter, represented 52% of total software revenue, resulting in a 19% year-over-year increase. The number of enterprise deals increased 23% year-over-year while our average enterprise deal size decreased 4% to approximately $242,000 during the quarter. From a geographic perspective, Americas, EMEA and APAC represented 55%, 30% and 15% of software revenue, respectively, for the quarter. On a year-over-year growth basis, Americas, EMEA and APAC software revenue increased 12%, 11% and 22%, respectively. The revenue mix for the quarter was split 42% software and 58% services. Please remember, services revenue is a combination of both maintenance and support revenue and professional services revenue. Services revenue for Q1 was $88.5 million, an increase of 3% sequentially and 7% year-over-year. Our maintenance and support renewal rates remain strong. Our maintenance realignment program is tracking well and I will discuss this in…

Thank you, Brian. I want to spend a few minutes on the current market dynamics, the Commvault Data Platform, as well as a broad range of additional solutions derived from the Commvault platform that will be coming out soon. The IT industry is in the midst of the greatest shift in the last 20 years, encompassing infrastructure and application architecture and deployment of consumption. Commvault solutions and services successfully address the five largest trends impacting the industry and our market space. These five trends are the movement to the cloud – the adoption of public and hybrid cloud infrastructure architectures as a replacement and/or supplement to traditional IT models. Secondly, application architecture. Enterprise customers are trying to get the cost and agility advantages of clouds by deploying distributed application architectures that address the demands of mobile Internet of Things and new business service requirements. The implication of these new distributed application architectures is twofold. First, engineering, coding and deployment processes and toolsets are rapidly changing dev/test procedures; and second, emergence of platform ecosystems allowing the sharing of business services, information, business processes and resources. Thirdly, software as a service, or SaaS. Enterprise adoption of SaaS-delivered solutions continues to accelerate. Gartner reports that SaaS represents 35% of all application revenue and by 2020 will represent almost 50%. The fourth big trend is big data and analytics. The rapid expansion of big data initiatives in the enterprise and the need for effective analytics and business intelligence outputs from this migration has moved from project to mainstream. The analytics trend has expanded from historical structured information repositories into broader implementations that address multiple types of data and offer distributed processing and repository options. As these technologies move into the mainstream, a clear and growing need which Commvault is uniquely positioned to address is…

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

Thank you. And our first question comes to Joel Fishbein with BTIG. Your line is open.

It looks like you've overperformed again on the operating margin, the EBIT margin side. Was that due to strictly to the revenue outperformance or did you guys hire fewer people than you thought you would in the quarter? And then I have one quick follow-up.

Yeah, I mean in general, Joel, we did a much better job in recruiting in Q1 versus Q4, where we really fell behind. But we had an extremely aggressive plan and we didn't hire to that plan. But in general, it's not the issue it was a quarter ago because we are making substantial progress in recruiting across the board and we're off to a very strong start in recruiting in Q2.

Okay. Follow-up, Bob, just on the big deals. I mean, you mentioned that the pipeline is really strong. We've heard of several much larger deals, sort of like you had when you guys were executing extremely well. Just love to get any color that you can give us on any of the multimillion dollar deals that are out there that you guys have the opportunity to capitalize on, and also in light of the fact that there might be some distraction from the Dell-EMC transaction that might help you guys out.

Well, there are very large deals out there, Joel. The question is when and if they will close. But they continue to enter our pipeline so they – let's just put it this way, the opportunity is there. I will say that we started off well in what I call half a million to $1 million deals in Q2, but those big mega-deals, right now they are in our pipeline and we are not forecasting major close rates on those until they happen.

All right. Thank you very much.

Thank you. Our next question comes from Jason Ader with William Blair. Your line is open. Jason N. Ader - William Blair & Co. LLC: Yeah, thanks. Bob, when you talked about linearity, are you talking about linearity for Q2 or Q1? And I have a follow-up.

Linearity for Q2 is substantially improved over Q1. Jason N. Ader - William Blair & Co. LLC: Okay. So basically you are off to a really good start, and Q1 was kind of typically backend-loaded as a Q1 would normally be?

Correct. Jason N. Ader - William Blair & Co. LLC: And then maybe for Brian, can you give us a sense of what the U.K. is as a percentage of revenue, and you probably have seen or heard from your folks over there that there is some significant turmoil around the pricing because of the British pound drop. How do you think that might affect your revenues?

Sure.

I will answer part of it. A number of our competitors have raised prices as a result of the drop in the pound. At this point, we haven't made any significant adjustments. I don't know, Brian, what do you think?

Yeah. Hi, Jason, it's Brian here. We do have a natural hedge to a certain extent between the expenses and revenue, so we do not think there is a significant impact on our consolidated net earnings. Historically, the pound does not represent a material portion of our overall consolidated revenue. We do sell in other currencies over in the U.K. Having said that, we are watching it. It is fluid. We are looking at sales funnels. We're looking at close rates. We're looking at pricing. And we're going to continue to monitor it. But for now, we do not see it as a material impact to consolidated earnings.

Thank you. Our next question comes from Abhey Lamba with Mizuho Securities. Your line is open.

Thank you and congrats on a good start to the year, Bob, and team. A quick question on your 1Q versus your internal plans. Because going into the quarter also you had mentioned that your internal plan was a bit higher than consensus. How did you do in Q1 versus your internal plan?

I would just leave it at we could have executed better. As good as the numbers were, there was opportunity to do better than that. So from an external standpoint these are really good numbers, but we have very aggressive internal plans, Abhey, so I would leave it at that.

Got it. And the dynamics behind deferred (38:38) of $1.4 million in license sales, is it due to some delivery milestones? Or are these solutions would be recognized on a ratable basis, which is causing this type of a move? When will that deferred (38:51) reverse?

Well, Brian, is going to go into this, but it's obviously pretty significant. That $1.4 million in increased deferred is a significant milestone for us. Brian?

Yeah, so I mean I think – Abhey, this is Brian here. This is just an example of when we're able to combine our new services offerings such as managed services with best-in-class products. This was a large perpetual deal. We'll say it's seven figures that went into deferred software revenue. This was combined with the managed services offering of several hundred thousand dollars. When you do these hybrid transactions under the current accounting rules, you are kind of forced to combine them and spread them over the services offering which will be 12 months for us. So you can look at this and say that, well, it'd be nice to have this as in-period recognition, but we view this as a positive. It's actually validation of our new services offerings. We won a sizable account and built some backlog along the way.

Got it. Thanks. And if I could slide one more, in terms of cloud workloads, what is the competitive landscape there, Bob, that you are seeing? And that's it for me.

I'll answer it and I'll let Al jump in here in a second. But in general, in large enterprises that are trying to implement and manage hybrid clouds in large-scale, we seem to be in a class by ourself and our ability to easily, simply and securely migrate data to the clouds and easily manage and secure data across these different infrastructures and – but this is a significant reason why we are gaining momentum in the market, and I'll let Al expand on that.

I think Bob hit it pretty well. I think the only thing I would add is most people these days are looking for hybrid environments, meaning a single federated view to their traditional data centers, their mobile as Bob defined, as well as the newer private-public cloud environments. And we seem to be in a class by ourselves in terms of one federated view, workload portability that's highly automated and highly orchestrated. And even our cloud coverage, I think we have 20 some cloud environments being able to move from cloud to clouds, hypervisors to hypervisors or OS to OS and I think that is all showing up as a big positive.

And this is across a number of different workloads, whether it is data protection and whether it's disaster recovery, whether it is dev/test, it's all seamless. It's all on one code base and it's all on one view of the data. And we have that view inside and across those different infrastructures, which really helps our customers not only execute these strategies but execute them economically.

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

Great. Thank you very much. Two quick questions. First, on the maintenance realignment program, it sounds like great progress has been made so far. I was just hoping we could dig a little bit into thinking about FY 2018 and moving forward and whether longer-term maintenance growth rates return to how they grew historically or if there is something about the public cloud that maybe changes how we should think about the longer-term maintenance growth rates as you get through this maintenance realignment program.

Hi, Greg. It's Brian. I'll take that question. So just to take a half a step back, I mean we are now forecasting an increase in our maintenance services revenue for the year. That is an increase over our prior estimates of being flat for FY 2017. So we are encouraged to a strong start to Q1. The program rollout is going really well. We are getting great feedback and strong renewal rates. We will see potentially a sequential decline in Q2 and Q3. We do start seeing that turn in Q4 of 2017 with a potential for sequential increase and that should continue through FY 2018. Just keep in mind, however, there is a lag effect and it does take a bit of time for it to ratchet back up to more normalized rates that eventually catch up to the software revenue growth rate, but that does take time throughout FY 2018.

Yeah, Greg, I think you will see your big, as Brian said, you will start to see both the growth and impact on operating margins as we enter FY 2018. I think you get your big swings occur in the second half of 2018 in terms of operating margin leverage as a result of this.

Great. That's helpful. And one quick follow-up on the public cloud providers. Some of the work we've done recently suggests that your partnership has strengthened with some of the largest public cloud providers out there, and I was just wondering if you could comment on – a lot of investors ask us if there is a risk that some of these larger public cloud providers build a solution like Commvault that they can then provide themselves. So I was just wondering if you could comment why that would or would not take place and maybe why your partnership is getting so much better with some of these public cloud providers. Thanks.

Well, there is no question that in both the case of Microsoft and AWS, our partnerships are strengthening because we make it real easy for customers not only to migrate to the cloud but manage their data in the cloud and then federate across different data sets. And I think that will continue for about as far out as we can see. There is no doubt that both Microsoft and AWS will increase functionality; and as they do, as we've done in the past with operating systems, we will adopt – we call it embrace and extend and leverage that increased functionality across our platform. So we don't view that as a threat. You just have to understand where value comes from and how you extend value being provided by these cloud providers. But somebody building a platform like Commvault, we don't see that as the high priority for the cloud providers. I mean it's important to us as we take the business from where we are to $1 billion or $2 billion, it is – that kind of growth is important for Commvault. It's not as relevant for a Microsoft or an AWS or a Dimension Data or a Rackspace. So we think the opportunity will continue for about as far out as we can see, and we will continue to enhance and expand on it.

Thank you. Our next question comes from Srini Nandury with Summit Redstone Partners. Your line is open.

All right. Thank you for taking my call. Bob, Brian, I know you mentioned in your prepared remarks that the move to the cloud continues to be a major driver for your business, particularly the software side. Can you give us some color on the size of the customers that are moving to the cloud? Is it perhaps the mid-market or is it more in the enterprise side you are seeing this trend?

Seeing it. Yeah, we are seeing it across, but most of our comments are focused on large enterprises, and it's becoming mainstream now. On the flip side of that, almost all large enterprises have legacy applications that cannot be moved to the cloud, so that's why you're seeing these hybrid clouds; because when you have a legacy application that's based on dedicated compute network and storage, you can't translate that into the cloud without rewriting it. So what you're seeing is for the large enterprises, many applications that can be moved to the cloud are being moved or any data that can be moved to the cloud is being considered to be moved to the cloud. So again, the comments I'm making are primarily tied to large enterprises, but we're seeing similar trends in medium enterprises as well. And Alan, do you want to add anything?

No. I think that's right on the money.

Okay, Bob, Al, you guys recently lost share in Commvault 11 platform. Can you talk about your conversations with your client base regarding upgrade and so forth? Thank you.

Well, I mean, that is the cornerstone of our growth. And I'll let Al comment on this because our innovation rate and breadth and depth with what we are doing with 11 is up substantially from where it was a year ago. And I want you to expand on that.

Yeah. So we just really put out our SP4 quarterly release in June. And as Bob said, we have moved to a rapid dev model. It was all built on a services architecture, which we moved to probably late V10. We are seeing that really become valuable in terms of speed and velocity. We are also, as a number of things we are doing, like our admin council there, these are all based on REST APIs. So we've taken a hard API approach to a lot of the developments. So we are getting leverage from the architecture. We've done a number of things process-wise internally to beef up even our quality, our testing and all of that with this rapid innovation model. And as Bob was alluding to, over a year ago we figured our productivity is somewhere in the range of double in terms of quality output of code. So we've definitely moved into that web scale, modern web dev platform type of approach for development there.

Thank you. Our next question comes from Aaron Rakers with Stifel. Your line is open. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Thanks for taking the questions, two if I can as well. So first, Bob, I would like to understand a little bit more about your thoughts on large deal pipeline and funnel. I know a couple of quarters ago you even talked about whale-sized deals. Have some of those impacted the reported results to date, and how do you think about those type of deals when you note that the Street is basically reasonable with regards to the expectations? Are those – is that building pipeline factored in at all in the context of the Street being reasonable?

No. They are not built-in, Aaron, and a lot of those deals have moved into smaller deals and really haven't positively impacted our results to date. That's why we don't include them in our Street comments and, quite frankly, we don't build them into our forecasting models because they're just too hard to predict at this point. I mean, that may change but we haven't seen any consistency in our ability to predict those deals. They are there. There are some massive deals out there. But we haven't realized – let me put it this way: none of them had a material impact on our results to date, and we don't expect any of those to have a material impact on our Q2 results either. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Perfect. And then as a second question, the healthcare vertical obviously is an opportunity that you guys have focused on. I am just curious if any update of what you've seen to date and when might that be a notable contribution to the business?

So what we have seen to date is a significant increase in healthcare revenue, but it has come from – for data protection as enterprises see we have the broader capabilities for clinical archive and being able to manage data from companies like Epic, it has clearly helped us in the broader healthcare industry. We have not to date translated that into these really big large opportunities on the clinical and electronic health record side of the business. So we are hitting some really good numbers, but not from a core strategic standpoint, and I think it's going to take us another three or four quarters to get that business to be a significant contributor. So I'll call it FY 2018, Aaron. But in the meantime, we are seeing acceleration in large deals and healthcare, but not on the clinical side.

Thank you. And our next question comes from John DiFucci with Jefferies. Your line is open.

This is A.J. Ljubich, on for John. I'm just wondering for the quarter, you beat Street estimates on total revenue but missed on software revenue, although we understand you don't explicitly guide to software revenue. I was just wondering, was a mix shift to more ratable or subscription-like revenue a headwind in the quarter and is there any way to quantify that impact?

Well, I wouldn't call it a headwind. If you add it in, we are basically on the number. I think you will see more of those kind of deals come in. I would consider them in general to be additive and not subtractive. In addition to that, in Q1, we took the field out of territory for quite a while for our sales meeting and club, so our time and territory, and we knew this going in, was a lot less, so to achieve these numbers given that fact and we feel pretty good about it. But in general, I think our potential to do – and we don't like to talk about deal slippage because your number is your number. But when you take your field out of territory for a while, you are not going to have as much closure as you would normally. So I would say on balance I think we did okay.

Thank you. Our next question comes from Andrew Nowinski with Piper Jaffray. Your line is open. Andrew James Nowinski - Piper Jaffray & Co. (Broker): All right, thanks. Just two quick questions. So first, I guess, what would it take to get your product license growth in the double digits in the second half of FY 2017, meaning do you need a higher-than-expected contribution from the cloud providers like Amazon and Microsoft and Cisco? Or does your funnel have enough deals to get those growth rates there?

Funnel has enough deals today to get us where we want to go over the next couple of quarters. But it's still dependent on large deal closures, as we said in the earnings script, and most of those deals are – call it on fundamentals tied to data management and data protection on-premise and in the cloud. In addition to that, we will start to see more and more traction from these new product offerings that we've talked about, like DR and dev/test, the stand-alone solutions and big data, to name those three. So those will incrementally add to license revenue growth over the next few quarters. And then when you get into the second half of the fiscal year, there is no question things like software-defined storage will become more meaningful to our growth. So we've got a real depth and breadth of capability on the product side and we are doing pretty well on expanding distribution. The number of new distribution partners that we have today versus a year ago is substantial, so I think you will see the license revenue growth being driven by, number one, I call it just core data management and managing data, let's call them hybrid environments in the cloud. I think you will see extension incrementally from new solutions coming in. You will see acceleration from the fact that we have more feet on the street, additional sales capacity and enhanced distribution. So it's coming from all of those different elements and that's why we have a good solid foundation now across the board to execute.

Thank you. Our next question comes from Alex Kurtz with Pacific Crest. Your line is open.

Yeah, thanks. Just following up on that, Bob, around sales force productivity in the Q1 and just overall yield rates versus where you would like to have been coming out of the quarter. I know that you added a lot of capacity over the last year and a half so when you think about getting to the license growth rates that you want in the back half of the year, do you see the right kind of attainment levels in the quarter to sort of give you that confidence?

Well, I implied that sales productivity was lower in Q1 due to the fact that we took teams out of the field for a long time, which was a fact. So we expect to see sales productivity improve in Q2 as a result of all the things I just mentioned. In addition to that we are doing a lot of other things that will positively impact sales productivity, including our new pricing models and distribution and better enablement and we are tracking that issue across the board. So the other factor that will impact sales productivity is that we have maturity now in all our theaters. We've restructured the Americas a year ago and that team is on a solid foundation. We restructured our APAC operations, and they are getting up to full capacity and speed, so we're seeing increased improvements in that theater. And we've got some new leadership now in EMEA, so we've got better stability there. And in addition to that, we are adding sales capacity heads and sales engineering support heads in the field to enhance that. Plus we have added overlay teams to help the fields more easily penetrate some of the new markets with our new product solutions and services.

All right. Thank you.

Thank you. Our next question comes from Michael Turits with Raymond James. Your line is open. Jeremy Benatar - Raymond James & Associates, Inc.: Hi guys, Jeremy Benatar in for Michael. Can you talk about how competition has been down-market against aggressively priced competitors like Veeam? Have you been able to both hold share and grow revenue in that segment? Thanks.

I think over the past year we have clearly – certainly Veeam has become, for us, less of a competitive issue. Let's put it that way. Our growth rates in the mid-market products that compete against Veeam are high, probably higher than Veeam growth rates. So my guess is we're picking up share in that segment of the market.

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

Yeah. Also on the competitive front, back to the enterprise side, historically it's been EMC and Veritas as competitors. They've both been going through their own internally focused restructuring spinouts, take privates. Any changes in the competitive behavior? Historically EMC had been a user of bundling to win business and then obviously the Symantec/Veritas a large install base. but now as a private company. If you could go a layer deeper on the behavior of those two, I would appreciate it.

We will continue to see aggressive pricing and bundling from EMC. I think that will accelerate with Dell, not decrease. I think the best perspective to have is that since we have been more focused, we are out-innovating those competitors and are better organized in the fields than we were and we have better distribution leverage relative to those competitors than we had a year ago. So at the margin, we are doing a more effective job relative to those traditional competitors.

And Veritas?

Well, I mean, what I was saying is if we are out-innovating them and we're better organized than they are, and we're better focused at the margin, we are doing a better job in winning and displacing Veritas accounts than we were a year ago.

Okay.

Thank you. And I am showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.