Thank you for standing by. At this time, I would like to welcome everyone to the Commvault Systems, Inc. Q4 fiscal year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to turn the conference over to Michael Melnyk, Head of Investor Relations. Please go ahead.

Good morning, and welcome to our earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault Systems, Inc.'s future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?

Thanks, Mike. I apologize if I'm a bit raspy. I'm recovering from the flu. Good morning. And thank you for joining today's call. I'm excited to share the results from another record-breaking Q4 and full fiscal year 2025. First, let's talk about the quarter. Total revenue increased 23% to $275 million. Subscription revenue grew 45% to $173 million. Total ARR improved 21% to $930 million, and SaaS ARR jumped 68% to $281 million. Fiscal year 2025 was a pivotal year. We reimagined resiliency for a cloud-first world. We doubled down on innovation and execution. And we firmly positioned ourselves as a growth company. We delivered highly differentiated data security and recovery offerings that make customers more resilient, including Clean Room, active directory, forest level recovery, and cloud rewind. We extended our partner ecosystem, including integrations with leading security players like Akamai, Dithera, Google Threat Intelligence, Splunk, and Waze. We integrated two acquisitions that expand the breadth and depth of our platform, reaching new cloud buyers and serving new markets, notably with AWS workloads. We reignited growth in our LAN business, adding nearly 3,000 subscription customers. We drove a double-digit improvement in sales productivity, and on a rule of 40 basis, we achieved 41 for the full fiscal year. As we begin fiscal year 2026, Commvault Systems, Inc. has never been better positioned to succeed and win. Let me talk about our three fundamental growth drivers. First, we expect to benefit from strong secular tailwinds tied to cyber resilience. Second, in a cloud-first world, our approach to continuous business is second to none. Third, we're executing both internally and with our growing partner ecosystem. I'll discuss each driver in more detail. First, cyber resilience remains a top strategic priority for organizations. Ransomware and sophisticated cyberattacks are increasing in frequency. Cloud environments…

Thanks, Sanjay. As Sanjay noted, Q4 was another excellent quarter driven by strong performance across geographic regions, increased contributions from our new offerings, elevated new customer growth, and healthy renewal and expansion activity within our installed base. I'm proud to say that our platform and our message are resonating with customers, and our team is executing against a growing market opportunity. I want to thank all the Commvaulters that contributed to the best fiscal year that Commvault Systems, Inc. has ever seen. Now I'll discuss our Q4 results and operating metrics, followed by a discussion of guidance for Q1 and fiscal 2026. Please note that all growth rates are compared on a year-over-year basis unless otherwise specified. Total ARR increased by 21% to $930 million on a reported basis. For a like-for-like comparison of FX-adjusted ARR to prior quarters, please refer to page 27 of the Q4 earnings presentation. Subscription ARR grew 31% to $780 million, including a substantial 68% increase in SaaS ARR, totaling $281 million. Subscription ARR now constitutes 84% of total ARR, compared to 77% one year ago. We consider subscription ARR to be the best indicator of the company's growth profile as it adjusts for the lower growth of our perpetual license and customer support businesses. Now I'll discuss Q4 revenue trends. Total revenue increased 23% to $275 million, driven by a robust 45% increase in subscription revenue. The growth in subscription revenue was driven by momentum across our SaaS platform, healthy growth in our software land business, and expansion with existing customers. Revenue from term software transactions over $100,000 increased by 38%, benefiting equally from an improvement in volume and average transaction size. This included more than a dozen transactions over $1 million. Many of these transactions carried multiyear terms as customers view Commvault as…

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you were called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. And your first question comes from the line of Eric Heath with KeyBanc Capital Markets. Your line is open.

Hey. Good morning, Sanjay, Jen. I just wanted to ask about the macro. Can you just talk about what you're hearing talking to customers, how they're thinking about the macro at this point in the month of April? How they're thinking about cyber resilience and if there's any changes to sales cycles at this point or close rates the last few weeks? And then lastly, Jen, just how you're thinking about these factors when you're thinking about building the guidance for fiscal 2026.

Sure. Hey, Eric. So, you know, obviously, there's a you know, we've been spending a lot of time looking and hearing and checking on what we should be assuming as part of fiscal year 2026 plan. At this point, you know, the best indicators are conversations with customers and partners. And everything we're hearing so far is that cyber resilience continues to be a priority. And, you know, we don't see anything dramatically different from our assumptions going into Q1. Now again, you know, it's what we know and what we're close to. Having said that, you know, we do have some very clear outcomes from the COVID period when we had supply chain issues and so, you know, we've done things like not we don't sell hardware. So we don't have any direct dependency, you know, on hardware, but customers obviously do sometimes with their they're installing a software or we give them optionality with SaaS. So there are, you know, so they've netted out, I'd say, it's a wait and watch, but at this point, no significant change between Q4 and Q1. Jen, do you want to add anything?

Yeah. Sure. And so in terms of how we thought about guidance, the first thing I would just say to you is our philosophy is consistent with historical. And I think overall, what you're hearing in our guidance is a balance between being prudent but also understanding there's a true need for our cyber release products and our own internal execution. So Sanjay said, we have constant conversations with partners and suppliers. And at this point, I think it's a balance, and we're feeling confident about the guidance that we've set out.

That's great. And, Jen, if I could just ask on the operating margin, guidance. About flat year over year. Again, for the second year. Understand the momentum in the business and the reason to invest, but just a little bit more clarity on you're thinking about the growth versus margin trade-off, where the investments are and just maybe some of the I would have thought we'd see some expansion kind of rolling off the Commvault acquisition last year that had some headwinds. Thanks.

So first of all, I would say we're really pleased with our FY 2025 performance. Rule of we hit rule of 41 for the year, rule of 45 for the quarter. As we think about next year, right, all the same things we've seen around the secular tailwinds, our own internal execution, the amount of buying decisions that continue in the market, lead us to want to continue to invest behind that opportunity. And so we're balancing those two things. And so, ultimately, what I would say to you is we're continuing to invest behind the opportunity while also being thoughtful around our overall profitability.

And, you know, SaaS as a business is growing? Has a different margin profile? So when you when all things considered, you know, we can we think it's a pretty good plan.

Those people. Michael? Well, Demi, we'll take the next question, please.

Your next question comes from the line of Aaron Rakers with Wells Fargo. Your line is open.

Yeah. Thanks for taking the question and congrats on the solid fiscal year. And the results. A couple of questions if I can real quick. In terms of Commvault, I think last quarter you had alluded to that being roughly about a $24 million contribution in this last quarter. I'm curious if you could, you know, maybe help us appreciate how much Commvault's provided, you know, this last quarter and kind of the momentum you're seeing there as you integrate that acquisition and really drive that business?

So first, I'll tell you is we're really excited. We continue to be very excited about Commvault in terms of what it does, in terms of expanding to additional customers and market segments. Going forward, we shared with you the Commvault Business last quarter to give you complexion. Going forward, we've integrated it fully into the platform. I won't be sharing specific guidance, but I can tell you as we think about next year's guidance, there's about a hundred bips in the number.

And on total on total revenue.

And Aaron, Sanjay here. Just on, you know, on the product, Commvault brings us some very unique capabilities with our ability to handle extremely large datasets. On S3. And AWS our ability to literally, you know, backtrack to previous version in a fraction of the time and even capability that nobody has in the business. This bodes very well for large datasets and AI type applications, data lakes. So we're really excited about it. We put a considerable amount of focus on it. For the new fiscal year. And it's, you know, we think it's going to be a big differentiator. Now, of course, we're not calling out numbers specifically. We're not doing it because it's part of our go-to-market. And part of our overall offer. Yeah.

Fair enough. And then as a real quick follow-up, you know, Jen, you talked about obviously the cross-sell upsell opportunity. Think, last quarter, maybe the last couple of quarters. I'm curious if you could help us appreciate the context of how much your SaaS portfolio has expanded. And maybe in that definition of like, how do you define success? Like, 30% goes to 50% or how are you thinking about that cross-sell opportunity within that SaaS customer base as you look out through the course of this next year?

Yeah. It's a great question. And I would say in the first of all, really continue to be proud of the fact that our SaaS net dollar retention remains at 127%. As I've shared and consistent with prior quarters, that mix is largely two-thirds upsell, one-third cross-sell. Where you would continue to see the continued adoption of newer offerings as well as our cyber offerings, things like AirGap Protect, Active Directory, Clean Room, Threat Scan, they made up 25% of our net new ARR this past quarter. And so while the mix is similar to prior quarters, I would say the number the absolute number of multiproduct customers is materially up. And you heard my prepared remarks a couple of great examples of customers that are taking on more than one product. So, also, I think we're really pleased. You heard this be a strategic priority without giving any sort of guidance. I think if you look at other peers in the industry where we show over time two, three, four products, I mean, that's what we're looking to see over time.

Yep.

Thank you.

Thanks. Thank you.

Your next question comes from the line of Param Singh with Oppenheimer. Your line is open.

Yeah. Hi. And thank you for taking my question. Really wanted to get a sense of, you know, what are you seeing in the competitive landscape? How's that changed after, you know, the close of the acquisition of Veritas by Cohesity. And, you know, you'd also mentioned that the other vendors such as Rubrik can be more stronger in cybersecurity. How are you addressing that? I would love to understand that. Thank you.

Sure.

So, you know, our strategy has been about resilience. We've been on the journey of helping our customers be more resilient, which if you double click is giving them a strong ability to recover in the face of either cyberattack or any other type of situation. We're very focused on that. And, you know, we choose our battles carefully. We believe with the best, our technology with Commvault Cloud, in a hybrid world, is the broadest capability there is. So customers work with us and we shared a lot of new customers, large customers, that have adopted the platform to make them more resilient. Now the overall on-premise market that some of the competitors you mentioned play in is flat to very low single digit. If you look at our growth, be it on revenue or ARR, it's healthy double digit. And that means we're taking shifts.

Sanjay, if I may follow-up on that. You know, one of the earlier questions was about the investments you're making, organic. Right? So I wanted to understand what type of workloads or capabilities do you want to focus on in the year to three years that you feel are largely on top at this point?

Yeah. So if you look at sort of where we think that, you know, the way we've been sharing our platform one is about anything to help customers with it's not so much workload, but capabilities to help customers recover. So things like Clean Room. Our ability to help them recover with Active Directory forest level, which is really good technology. Right? They've done very needed. If you look at what we're doing with Commvault, and the Commvault capabilities, it's about scale. And the ability to scale out, you know, hundreds of petabytes of data in minutes and hours versus what would take, you know, unpredictable amounts of time if customers need to roll back something. If you look at our rewind technology that we acquired through Nutanix, which allows you to sort of rebuild at the click of a button and literally, I mean, click of a button. Entire cloud-native applications, configurations, the infrastructure that's needed to support and the data, of course. We are, you know, we're changing the game. We're changing what protection means and what resilience means. Now with that, we're obviously enhancing emerging workloads, be it things that support AI, be it things like vector databases, whether it's more cloud capabilities. So we continue to enhance the workloads, but really what we're really enhancing is our ability to make customers more resilient. In the face of something that brings their business back.

Down. Great. And if one last point if I could squeeze that in. Sanjay, I want to really get your view on this whole idea that, you know, backup vendors could be the source of truth into LLMs and feed into it. Some of your competitors have talked about it. I wanted to get your sense. Do you think that's realistic or that something that Commvault might want to get into over the next year or so?

You know, we tend to we only tend to mention something when we have capabilities to support it.

Sure. You're that's the truth. Directionally, I would say that

that we as in Commvault have been a very good source of the truth. And to do that, you have to be application aware. Okay? So even in historical applications, on-premise applications, which are tightly coupled and engineered, bringing back state, bringing back what you know, bringing back the application to the way it was when there was an error or a failure, has always been where we shine. Now with AI apps, the prominence of the applications and the componentry of that becomes is very important. In fact, I think I would go first thing is more important. Because of the way these apps are built and used. So I'm not getting ahead of myself, but to say that we could have a very good role to play in something like that is fair.

Thank you for sharing your insights on. Appreciate it. Thank you. Mhmm.

Your next question comes from the line of Rudy Kessinger with DA Davidson. Your line is open.

Hey. Great. Thanks for taking my questions, guys. On the ARR guide, could you just give us some parameters, I guess, around expected net new ARR, you know, in Q1 or just seasonality we should be in mind of for the year? I know Q3, Q2, Q3 were your strongest years last year. Just how should that, you know, low $150 million of net new ARR fall throughout the year?

Yeah. I think what you can expect to see is typical seasonality of what we saw in FY 2025. I think the baseline of $30 to $35 million on a quarterly basis is still the right way to think about the business. Especially given the strength that we saw particularly in Q3 this past quarter.

Got it. And then I just want to drill down maybe, you know, it was already asked about the guide and what it implies. From a macro standpoint. Just maybe to be clear, you know, you talked about record sales productivity and improvements year over year in Q4, etcetera. What does the guide imply from a sales productivity close rate etcetera, standpoint? Does it imply things are flat with last year or further improvements building on last year?

Yeah. Really, I would just say go back to my comments around we're being prudent about the macro, but also understanding we have a great opportunity in front of us. And so what I would say is we're not assuming massive gains in productivity, but we're quite confident in the durability of our model over the long term.

Got it. Great. Thank you. Alright. And congrats again on the quarter.

Thanks again, Rudy.

Your next question comes from the line of James Fish with Piper Sandler. Your line is open.

Hey, guys. Appreciate the questions here. Can you just walk us through the growth on the international arena this year between EMEA and APAC? And more specifically, how you're thinking about durability of growth and really answering why won't some of the DORA tailwinds that you guys even talked about in your prepared remarks start to subsidize throughout the year just given that implementation date back in January.

Yeah. Thanks. I would say to you that overall from a guidance perspective, we're expecting balanced growth where we already thought. This past quarter, we saw balanced growth across our regions. Right? And, overall, EMEA actually had a really strong quarter without giving you too much detail on that. Ultimately, I would say to you as we think about next year, overall, we're incorporating what we know about the macro also been quite confident in our pipelines after we talk to customers and partners.

Hey, Jim. And also on the regulatory stuff, it's not a one and done. You know, these things are constantly evolving depending on the size of the institution, depending on the branches, depending on you know, it's just it's not it's not one of those. So it's a process that goes over time.

Got it. And Sanjay, you had you had kind of talked about this and actually you as well Jen driving greater stickiness. So how are we supposed to think about the packaging or perhaps bundling that you could see particularly on the cloud or SaaS side versus having customers purchase individual SKUs moving forward?

Yeah. That's a great question. So they'll all let me make the second half of the question first. There'll always be specific workloads with customers need to protect. So that will never go away. So, you know, I'm an Oracle shop. Tomorrow, I buy something that has SAP. I need to incorporate SAP into the same single pane of glass. Same policy. Know? So that will that will continue. Where we have spent a lot of our time, effort, and in turn, the way we create IP, is around resilience. Now resilience isn't a simple thing. Resilience is, you know, it means different things to different companies and we are, you know, we're working with this concept of a minimum viable company where what does it take to come back to life in a minimum capacity? Let's say, your data center gets messed up or you get cyber attacked or whatever the cause is. You know, what is your predictable way? What is your predictable resilience to come back to life? In a minimum way? Now some of that is process. Some of that is skills. Some of that is technology. And we're working with partners to help customers think through this and build this out. So then when you look at products like AirGap Protect, and Clean Room and AD Forest Level Recovery, and other workloads that we back up, all of this falls into the constructive resilience. And customers tend to then think about and will continue hopefully to think about resilience as the outcome and what do we need to do to make that happen. And then you'll see that the stacking of what we're bringing to market makes a lot of sense and the packaging around that makes a lot of sense. Hence, Jen's comments about being able to cross-sell other abilities. And we don't distinguish between SaaS and software. You could be a software customer and still avail of our SaaS capabilities. Depending on what it's. Hopefully, that added some color.

Got it. Thanks.

Thanks.

Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Howard Ma with Guggenheim Securities. Your line is open.

Great. Thanks for taking the question. Jen, you mentioned earlier on SaaS, and ARR that the mix between upsell and cross-sell should do we expect the mix to shift more to cross-sell in FY 2026 given your pace of product innovation? And what I'm getting at is when I correct me if I'm wrong, but when I think about your products that I like, in terms of, like, a layered cake approach, like, you have what I call backing up cloud-native workloads, you know, M365, Salesforce, VM, then you have more security-specific modules, you know, threat-wise and the like. I don't know if AirGap Protects, you know, Clean Room and Recovery fits in that bucket or the cloud-native bucket, perhaps both. And then Sanjay also mentioned that the newer modules, you know, at the Active Directory, which you guys have emphasized a lot, the cloud rewinds, Commvault. Can you kind of give us a sense of where you like, where are you on I don't know if those are the right three buckets, but you know, in terms like a layered cake approach, should that drive more of a shift to cross-sell then instead of upsell this year? Thank you.

Yes. It's a great question. While I won't guide any specific mix, we do expect expansion in our multiproduct adoption over time because it is a strategic focus for us. And you're absolutely right as you think about the cyber products Clean Room, AirGap Protect, Threat Scan, Cloud Rewind, Commvault, all Active Directory, all important products as we think about the expansion the overall cross-sell motion.

Okay. Got it. Thanks. As a follow-up, and I'll keep this on a little shorter, it's a similar question on the term subscription side. How much of that strength is driven by improvement or perhaps stability in our gross retention and renewal timing as compared to new, you know, new term subscription licenses and how much is the hybrid approach, the Commvault hybrid approach driving cross-sell of HyperScaleX? Like, is it really the hybrid approach or is it just existing customers, you know, buying more, expanding more, but not necessarily hybrid?

Yeah. So first, I will start with you. The software term license portion this quarter was particularly strong. Not only in land, but also in the renewal and expansion. And so to your point, we absolutely see that customers come to Commvault because we cannot only protect their on-premise workloads, quite well, we can grow with they can grow with us as they add more platforms in the cloud, etcetera. I don't know. Sanjay, if you want to add anything to that?

The hybrid, you know, what we bring to customers with our true hybrid multi-cloud approach is what separates us from the pack. Our singular cloud platform Commvault Cloud, you know, you don't need to worry about having an air-gapped copy if you're an on-premise HyperScaleX customer, it just happens for you. You can choose the cloud you want. And we'll make the rest of it happen. Active Directory is completely transparent as the service runs. So we have been able to bridge that experience for our customers regardless of whether they dock with us with a HyperScaleX starting point or they come in from the cloud and then realize that, hey. This easy enough for me to, you know, have a single pane of glass for my on-premise workloads. So we have cases of both. And as our product capability to be shared a little bit about today already, evolved and have evolved, customers see this as the value proposition. Okay? And artificial I've said this for years. Artificial separation between a cloud or a SaaS-based capability and an on-premise capability is giving customers choices that they don't need to make. Or giving them things to do that they don't need. So we try and abstract that away and give you a unified approach. We're very unique in that.

Great. Thanks so much.

Thank you. Thanks for the question.

Seeing no further questions at this time, that does conclude our question and answer session. I will turn the call back over to Michael Melnyk for closing remarks.

Thanks for joining the call this morning. For those of you who are in San Francisco, we encourage you to stop by the North Hall RSA and visit our experience booth 5678. We have made some exciting announcements around this event. And reach out with any questions after that. Thanks so much.

This concludes today's conference call. You may now disconnect.