PR Newswire | May 4, 2021 07:45AM EDT

05/04 06:45 CDT

Commvault Announces Fiscal 2021 Fourth Quarter Financial Results-- Record quarterly and annual revenue ---- Fourth quarter software and products revenue up 35% year over year ---- Fourth quarter recurring revenue up 24% year over year -- TINTON FALLS, N.J., May 4, 2021

TINTON FALLS, N.J., May 4, 2021 /PRNewswire/ --

Fourth quarter and Fiscal 2021 highlights include:

Fourth quarterFiscal 2021

GAAP Results:

Revenues $191.3 million$723.5 million

Income (Loss) from Operations (EBIT)$10.3 million $(22.3) million

EBIT Margin 5.4% (3.1)%

Diluted Earnings (Loss) Per Share $0.13 $(0.66)



Non-GAAP Results:

Income from Operations (EBIT) $38.8 million $137.5 million

EBIT Margin 20.3% 19.0%

Diluted Earnings Per Share $0.59 $2.11

Commvault [NASDAQ: CVLT] today announced its financial results for the fourth quarter and fiscal year ended March 31, 2021.

"We are proud to report Commvault delivered record quarter and full fiscal year revenue coupled with material operating margin expansion," said Sanjay Mirchandani, President and CEO. "Our portfolio and roadmap are strong, our team is focused on execution, and our vision is resonating in the marketplace. While our work is never done, our transformation efforts thus far have been successful and we expect will fuel our continued growth in the new fiscal year."

Total revenues for the fourth quarter of fiscal 2021 were $191.3 million, an increase of 16% year over year. Total recurring revenue was $145.6 million, an increase of 24% year over year. For the full fiscal year, total revenues were $723.5 million, an increase of 8% from fiscal year 2020.

Annualized recurring revenue (ARR), which is the annualized value of all active Commvault recurring revenue streams at the end of the reporting period, was $517.9 million as of March 31, 2021, up 15% from March 31, 2020.

Software and products revenue in the fourth quarter was $89.4 million, an increase of 35% year over year. The year over year increase in software and products revenue was driven by a 39% increase in revenue from larger deals (deals greater than $0.1 million in software and products revenue). Larger deal revenue represented 69% of our software and products revenue in the three months ended March 31, 2021. The number of larger deal revenue transactions increased 30% year over year to 198 deals for the three months ended March 31, 2021. The average dollar amount of larger deal revenue transactions was approximately $313,000, representing a 7% increase from the prior year quarter.

Software and products revenue for the full fiscal year was $326.8 million, an increase of 19% from fiscal 2020. The year over year increase in software and products revenue was driven by a 26% increase in revenue from larger deals. Larger deal revenue represented 69% of our software and products revenue in fiscal year 2021. The number of larger deal revenue transactions increased 12% from fiscal year 2020 to 673 deals. The average dollar amount of larger deal revenue transactions was approximately $335,000, representing a 13% increase from the prior year.

Services revenue in the quarter was $102.0 million, up 4% year over year. For the full fiscal year, services revenue was $396.6 million, flat from fiscal 2020.

On a GAAP basis, income from operations (EBIT) was $10.3 million for the fourth quarter compared to loss of $2.2 million in the same period of the prior year. Non-GAAP EBIT was $38.8 million in the quarter compared to $18.3 million in the prior year.

On a GAAP basis, loss from operations (EBIT) for the full fiscal year was $22.3 million compared to loss of $17.5 million in fiscal year 2020. Non-GAAP income from operations (EBIT) was $137.5 million in fiscal 2021 compared to $87.5 million in the prior fiscal year.

For the fourth quarter of fiscal 2021, Commvault reported net income of $6.3 million. Non-GAAP net income for the quarter was $28.5 million, or $0.59 per diluted share.

For the full fiscal year, Commvault reported net loss of $31.0 million. Non-GAAP net income for the full fiscal year was $101.1 million, or $2.11 per diluted share.

Operating cash flow totaled $64.7 million for the fourth quarter of fiscal 2021 compared to $32.5 million in the prior year quarter. For the full fiscal year, operating cash flow was $124.0 million, compared to $88.5 million for fiscal year 2020. Total cash and short-term investments were $397.2 million as of March 31, 2021 compared to $339.7 million as of March 31, 2020.

During the fiscal fourth quarter, Commvault repurchased approximately 943,000 shares of its common stock totaling $62.1 million at an average price of approximately $65.91 per share. During the full fiscal year, Commvault repurchased approximately 1.6 million shares of its common stock totaling $95.3 million at an average price of approximately $57.97 per share.

A reconciliation of GAAP to non-GAAP results has been provided in Financial Statement Table IV included in this press release. An explanation of these measures is also included below under the heading "Use of Non-GAAP Financial Measures."

Use of Non-GAAP Financial Measures

Commvault has provided in this press release the following non-GAAP financial measures: non-GAAP income from operations, non-GAAP income from operations margin, non-GAAP net income, non-GAAP diluted earnings per share and annualized recurring revenue (ARR). This selected financial information has not been prepared in accordance with GAAP. Commvault uses these non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. In addition, Commvault believes these non-GAAP operating measures are useful to investors, when used as a supplement to GAAP financial measures, in evaluating Commvault's ongoing operational performance. Commvault believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Commvault's industry, many of which present similar non-GAAP financial measures to the investment community. Commvault has also provided software and products, services and total revenues on a constant currency basis. Commvault analyzes revenue growth on a constant currency basis in order to provide a comparable framework for assessing how the business performed excluding the effect of foreign currency fluctuations.

All of these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided in Table IV included in this press release.

Non-GAAP income from operations and non-GAAP income from operations margin. These non-GAAP financial measures primarily exclude noncash stock-based compensation charges and additional FICA and related payroll tax expense incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards as well as restructuring costs. In fiscal 2021, Commvault has also excluded certain costs related to key employees of Hedvig and the noncash amortization and impairment of intangible assets from its non-GAAP results. These expenses are further discussed in Table IV. Commvault believes that these non-GAAP financial measures are useful metrics for management and investors because they compare Commvault's core operating results over multiple periods. When evaluating the performance of Commvault's operating results and developing short- and long-term plans, Commvault does not consider such expenses.

Although noncash stock-based compensation and the additional FICA and related payroll tax expenses are necessary to attract and retain employees, Commvault places its primary emphasis on stockholder dilution as compared to the accounting charges related to such equity compensation plans. Commvault believes that providing non-GAAP financial measures that exclude noncash stock-based compensation expense and the additional FICA and related payroll tax expenses incurred on stock option exercises and vesting of restricted stock awards allow investors to make meaningful comparisons between Commvault's operating results and those of other companies.

Amortization and impairment charges of intangible assets are noncash items. Commvault believes the exclusion of these expenses provide for a useful comparison of operating results to prior periods and to other companies.

There are a number of limitations related to the use of non-GAAP income from operations and non-GAAP income from operations margin. The most significant limitation is that these non-GAAP financial measures exclude certain operating costs, primarily related to noncash stock-based compensation, which is of a recurring nature. Noncash stock-based compensation has been, and will continue to be for the foreseeable future, a significant recurring expense in Commvault's operating results. In addition, noncash stock-based compensation is an important part of Commvault's employees' compensation and can have a significant impact on their performance. Lastly, the components that Commvault excludes in its non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP financial measures.

Commvault's management generally compensates for the limitations described above related to the use of non-GAAP financial measures by providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Further, Commvault management uses non-GAAP financial measures only in addition to, and in conjunction with, results presented in accordance with GAAP.

Non-GAAP net income and non-GAAP diluted earnings per share (EPS).In addition to the adjustments discussed in non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS incorporates a non-GAAP effective tax rate of 27%.

Commvault anticipates that in any given period its non-GAAP tax rate may be either higher or lower than the GAAP tax rate as evidenced by historical fluctuations. The GAAP tax rates in recent fiscal years were not meaningful percentages due to the dollar amount of GAAP pre-tax income. For the same reason as the GAAP tax rates, the estimated cash tax rates in recent fiscal years are not meaningful percentages. Commvault defines its cash tax rate as the total amount of cash income taxes payable for the fiscal year divided by consolidated GAAP pre-tax income. Over time, Commvault believes its GAAP and cash tax rates will align.

Commvault considers non-GAAP net income and non-GAAP diluted EPS useful metrics for Commvault management and its investors for the same basic reasons that Commvault uses non-GAAP income from operations and non-GAAP income from operations margin. In addition, the same limitations as well as management actions to compensate for such limitations described above also apply to Commvault's use of non-GAAP net income and non-GAAP EPS.

Conference Call Information

Commvault will host a conference call today, May 4, 2021 at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss its financial results. To access this call, dial 844-742-4247 (domestic) or 661-378-9470 (international). The live webcast can be accessed under the "Events" section of Commvault's website. An archived webcast of this conference call will also be available following the call.

About Commvault

Commvault is the recognized leader in data backup and recovery. Commvault's converged data management solution redefines what backup means for the progressive enterprise through solutions that protect, manage and use their most critical asset - their data. Commvault software, solutions and services are available from the company and through a global ecosystem of trusted partners. Commvault employs more than 2,600 highly-skilled individuals across markets worldwide, is publicly traded on NASDAQ (CVLT), and is headquartered in Tinton Falls, New Jersey in the United States. To learn more about Commvault visit www.commvault.com

Safe Harbor Statement

This press release may contain forward-looking statements, including statements regarding financial projections, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of software products and related services, general economic conditions, outcome of litigation and others. For a discussion of these and other risks and uncertainties affecting Commvault's business, see "Item IA. Risk Factors" in our annual report in Form 10-K and "Item 1A. Risk Factors" in our most recent quarter report in Form 10-Q. Statements regarding Commvault's beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from anticipated results. Commvault does not undertake to update its forward-looking statements. The development and timing of any product release as well as any of its features or functionality remain at our sole discretion.

(c)1999-2021 Commvault Systems, Inc. All rights reserved. Commvault, Commvault and logo, the "C hexagon" logo, Commvault Systems, Commvault HyperScale, ScaleProtect, Commvault OnePass, Unified Data Management, Quick Recovery, QR, CommNet, GridStor, Vault Tracker, InnerVault, Quick Snap, QSnap, IntelliSnap, Recovery Director, CommServe, CommCell, APSS, Commvault Edge, Commvault GO, Commvault Advantage, Commvault Complete, Commvault Activate, Commvault Orchestrate, Commvault Command Center, Hedvig, Universal Data Plane, the "Cube" logo, Metallic, the "M Wave" logo, Be Ready and CommValue are trademarks or registered trademarks of Commvault Systems, Inc. All other third party brands, products, service names, trademarks, or registered service marks are the property of and used to identify the products or services of their respective owners. All specifications are subject to change without notice.

Table I



Commvault Systems, Inc.



Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)



Three Months Ended Year Ended March 31, March 31,

2021 2020 2021 2020

Revenues:

Software and products $89,355 $66,408 $326,843 $275,308

Services 101,986 98,341 396,629 395,577

Total revenues 191,341 164,749 723,472 670,885

Cost of revenues:

Software and products 6,552 5,144 27,218 28,082

Services 23,059 21,450 82,155 88,996

Total cost of revenues 29,611 26,594 109,373 117,078

Gross margin 161,730 138,155 614,099 553,807

Operating expenses:

Sales and marketing 86,661 82,877 331,948 335,785

Research and development 35,577 32,710 133,401 110,020

General and administrative 23,205 21,006 92,214 92,130

Restructuring 3,762 2,397 23,471 21,348

Impairment of intangible assets- - 40,700 -

Depreciation and amortization 2,187 5,134 14,628 15,815

Net change in contingent - (3,783) - (3,783) consideration

Total operating expenses 151,392 140,341 636,362 571,315

Income (loss) from operations 10,338 (2,186) (22,263) (17,508)

Interest income 269 692 1,028 4,962

Income (loss) before income 10,607 (1,494) (21,235) (12,546) taxes

Income tax expense (benefit) 4,346 (10,429) 9,719 (6,901)

Net income (loss) $6,261 $8,935 $(30,954)$(5,645)

Net income (loss) per common share:

Basic $0.13 $0.19 $(0.66) $(0.12)

Diluted $0.13 $0.19 $(0.66) $(0.12)

Weighted average common shares outstanding:

Basic 46,888 46,420 46,652 45,793

Diluted 48,670 46,718 46,652 45,793

Table II



Commvault Systems, Inc.



Condensed Consolidated Balance Sheets (In thousands) (Unaudited)



March 31, March 31,

2021 2020

ASSETS

Current assets:

Cash and cash equivalents $397,237$288,082

Restricted cash - 8,000

Short-term investments - 43,645

Trade accounts receivable, net 188,126 146,990

Other current assets 22,237 26,969

Total current assets 607,600 513,686



Property and equipment, net 112,779 114,519

Operating lease assets 20,778 15,009

Deferred commissions cost 38,444 31,394

Intangible assets, net - 46,350

Goodwill 112,435 112,435

Other assets 12,137 11,683

Total assets $904,173$845,076



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $374 $307

Accrued liabilities 112,148 87,051

Current portion of operating lease liabilities7,469 7,699

Deferred revenue 253,211 233,497

Total current liabilities 373,202 328,554



Deferred revenue, less current portion 119,231 92,723

Deferred tax liabilities, net 761 849

Long-term operating lease liabilities 15,419 8,808

Other liabilities 1,526 2,238



Total stockholders' equity 394,034 411,904

Total liabilities and stockholders' equity $904,173$845,076

Table III



Commvault Systems, Inc.



Consolidated Statements of Cash Flows (In thousands) (Unaudited)



Three Months Ended Year Ended March 31, March 31,

2021 2020 2021 2020

Cash flows from operating activities

Net income (loss) $6,261 $8,935 $(30,954)$(5,645)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization2,499 5,447 15,878 17,065

Noncash stock-based 23,261 17,307 84,833 65,888 compensation

Noncash change in contingent - (3,783) - (3,783) consideration

Impairment of intangible - - 40,700 - assets

Deferred income taxes (92) (1,783) (92) (1,783)

Amortization of deferred 4,571 4,567 18,318 17,717 commissions cost

Impairment of operating lease380 566 1,684 2,761 assets

Changes in operating assets and liabilities:

Trade accounts receivable, 4,348 13,361 (34,622) 26,096 net

Operating lease assets and (438) (714) (1,157) (1,226) liabilities, net

Other current assets and 4,932 (6,832) 11,887 (1,246) Other assets

Deferred commissions cost (8,149) (4,711) (24,095) (16,063)

Accounts payable (224) (748) 49 (2,474)

Accrued liabilities 10,176 21 10,660 (1,997)

Deferred revenue 21,021 32 31,740 (6,230)

Other liabilities (3,838) 791 (874) (616)

Net cash provided by 64,708 32,456 123,955 88,464 operating activities

Cash flows from investing activities

Purchase of short-term - (10,845) - (43,645) investments

Proceeds from maturity of 10,845 32,188 43,645 130,338 short-term investments

Purchase of property and (2,182) (1,292) (8,176) (3,203) equipment, net

Business combination, net of - - - (157,495)cash acquired

Net cash provided by (used 8,663 20,051 35,469 (74,005) in) investing activities

Cash flows from financing activities

Repurchase of common stock (62,127) (37,172) (95,259) (77,198)

Proceeds from stock-based 13,518 6,851 20,521 37,795 compensation plans

Net cash used in financing (48,609) (30,321) (74,738) (39,403) activities

Effects of exchange rate - (5,094) (6,129) 16,469 (6,966) changes in cash

Net increase (decrease) in cash, cash equivalents and 19,668 16,057 101,155 (31,910) restricted cash

Cash, cash equivalents and restricted cash at beginning 377,569 280,025 296,082 327,992 of year

Cash, cash equivalents and restricted cash at end of $397,237$296,082$397,237 $296,082year

Table IV



Commvault Systems, Inc.



Reconciliation of GAAP to Non-GAAP Financial Measures and Other Financial Information (In thousands, except per share data) (Unaudited)



Three Months Ended Year Ended March 31, March 31,

2021 2020 2021 2020

Non-GAAP financial measures and reconciliation:

GAAP income (loss) from $10,338 $(2,186)$(22,263)$(17,508)operations

Noncash stock-based 22,372 17,236 82,086 64,135 compensation (1)

FICA and payroll tax expense related to stock-based 952 381 2,196 1,571 compensation (2)

Restructuring (3) 3,762 2,397 23,471 21,348

Hedvig deferred payments (4)1,406 1,406 5,624 2,812

Amortization of intangible - 2,825 5,650 5,650 assets (5)

Impairment of intangible - - 40,700 - assets (6)

Net change in contingent - (3,783) - (3,783) consideration (7)

Non-routine shareholder - - - 7,628 matters (8)

Acquisition costs (9) - - - 5,639

Non-GAAP income from $38,830 $18,276 $137,464 $87,492 operations



GAAP net income (loss) $6,261 $8,935 $(30,954)$(5,645)

Noncash stock-based 22,372 17,236 82,086 64,135 compensation (1)

FICA and payroll tax expense related to stock-based 952 381 2,196 1,571 compensation (2)

Restructuring (3) 3,762 2,397 23,471 21,348

Hedvig deferred payments (4)1,406 1,406 5,624 2,812

Amortization of intangible - 2,825 5,650 5,650 assets (5)

Impairment of intangible - - 40,700 - assets (6)

Net change in contingent - (3,783) - (3,783) consideration (7)

Non-routine shareholder - - - 7,628 matters (8)

Acquisition costs (9) - - - 5,639

Non-GAAP provision for (6,210) (15,550) (27,674) (31,863) income taxes adjustment (10)

Non-GAAP net income $28,543 $13,847 $101,099 $67,492



Diluted weighted average 48,670 46,718 47,803 46,440 shares outstanding

Non-GAAP diluted earnings $0.59 $0.30 $2.11 $1.45 per share



Three Months Ended Year Ended March 31, March 31,

2021 2020 2021 2020

Subscription software and $53,057 $26,390 $191,296 $112,439 products revenue

Perpetual software and 36,298 40,018 135,547 162,869 products revenue

Total software and products $89,355 $66,408 $326,843 $275,308 revenue

Subscription as a % of total software and products 59% 40% 59% 41% revenue



Three Months Ended Year Ended March 31, March 31,

2021 2020 2021 2020

Subscription software and $53,057 $26,390 $191,296 $112,439 products revenue

Recurring support and 92,521 91,214 364,487 364,519 services revenue

Total recurring revenue $145,578$117,604$555,783 $476,958

Percentage of total revenues76% 71% 77% 71%



Perpetual software and $36,298 $40,018 $135,547 $162,869 products revenue

Non-recurring services 9,465 7,127 32,142 31,058 revenue

Total non-recurring revenue $45,763 $47,145 $167,689 $193,927

Percentage of total revenues24% 29% 23% 29%



Total Revenue (11) $191,341$164,749$723,472 $670,885

Measures at period ending ($000s)

March 31, December 31, March 31, 2020 2020 2021

Annualized Recurring Revenue $451,667 $507,242 $517,948 (12)



Three Months Ended March 31, 2021

Americas EMEA APJ Total

Software and Products Revenue$53,505 $27,441$8,409 $89,355

Customer Support Revenue 52,928 26,591 10,490 90,009

Other Services Revenue 7,326 3,167 1,484 11,977

Total Revenue $113,759$57,199$20,383$191,341

Three Months Ended March 31, 2020

Americas EMEA APJ Total

Software and Products Revenue$34,481$23,434$8,493 $66,408

Customer Support Revenue 56,776 23,155 10,183 90,114

Other Services Revenue 4,599 2,424 1,204 8,227

Total Revenue $95,856$49,013$19,880$164,749

Year Ended March 31, 2021

Americas EMEA APJ Total

Software and Products Revenue$187,027$101,673$38,143$326,843

Customer Support Revenue 215,831 100,620 41,330 357,781

Other Services Revenue 21,264 12,138 5,446 38,848

Total Revenue $424,122$214,431$84,919$723,472



Year Ended March 31, 2020

Americas EMEA APJ Total

Software and Products Revenue$141,856$95,356 $38,096$275,308

Customer Support Revenue 230,226 88,965 40,939 360,130

Other Services Revenue 18,778 10,459 6,210 35,447

Total Revenue $390,860$194,780$85,245$670,885



Three Months Ended Year Ended March 31, 2021 March 31, 2021

SequentialYear Over Year Over Year Year

Non-GAAP software and products revenue reconciliation

GAAP software and $89,355 $89,355 $326,843 products revenue

Adjustment for (403) (3,312) (6,843) currency impact

Non-GAAP software and products revenue on a $88,952 $86,043 $320,000 constant currency basis (13)



Three Months Ended Year Ended March 31, 2021 March 31, 2021

SequentialYear Over Year Over Year Year

Non-GAAP services revenue reconciliation

GAAP services revenue $101,986$101,986$396,629

Adjustment for (957) (3,744) (6,628) currency impact

Non-GAAP services revenue on a constant currency $101,029$98,242 $390,001 basis (13)



Three Months Ended Year Ended March 31, 2021 March 31, 2021

SequentialYear Over Year Over Year Year

Non-GAAP total revenue reconciliation

GAAP total revenues $191,341$191,341$723,472

Adjustment for (1,360) (7,056) (13,471) currency impact

Non-GAAP total revenues on a constant currency basis $189,981$184,285$710,001 (13)

Footnotes - Adjustments

Represents noncash stock-based compensation charges associated with(1) restricted stock units granted and our Employee Stock Purchase Plan. Those amounts are represented as follows:

Three Months Ended March Year Ended March 31, 31,

2021 2020 2021 2020

Cost of services revenue 966 581 3,317 2,604

Sales and marketing 9,671 7,646 35,577 31,779

Research and development 7,101 5,368 24,823 14,594

General and administrative 4,634 3,641 18,369 15,158

Stock-based compensation 22,372 17,236 82,086 64,135 expense

The table above excludes stock-based compensation expense related to the Company's restructuring activities described below in footnote three.

Represents additional FICA and related payroll tax expenses incurred by(2) Commvault when employees exercise in the money stock options or vest in restricted stock awards.

In recent fiscal years, Commvault initiated restructuring plans to increase efficiency in its sales, marketing and distribution functions as well as reduce costs across all functional areas. These restructuring charges relate primarily to severance and related costs associated with(3) headcount reductions, as well as the closure of offices. Restructuring includes stock-based compensation related to modifications of awards granted to former employees. Management believes, when used as a supplement to GAAP results, that the exclusion of these charges will help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.

In connection with the acquisition of Hedvig Inc., certain Hedvig shareholders will receive cash payments for the 30 months following the date of acquisition, subject to their continued employment with Commvault. While these payments are proportionate to these shareholders'(4) ownership of Hedvig, under GAAP they are accounted for as compensation expense within Research and development expenses over the course of the 30 month service period. Management believes, when used as a supplement to GAAP results, that the exclusion of these non-routine expenses will help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.

(5) Represents noncash amortization of intangible assets.

In the second quarter of fiscal 2021, Commvault recorded an impairment charge of its acquired intangible assets. These non-cash charges are not(6) representative of ongoing costs to the business and are not expected to recur. As a result, these charges are being excluded to provide investors with a more comparable measure of costs associated with ongoing operations.

(7) Represents the change in fair value of the contingent consideration associated with the acquisition of Hedvig.

During the second quarter of fiscal 2020, Commvault incurred costs related to the acquisition of Hedvig, Inc. Management believes, when used as a(8) supplement to GAAP results, that the exclusion of these costs will help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to other periods.

During fiscal 2020, Commvault incurred costs related to a non-routine shareholder matter. The costs are for professional fees related to the settlement agreement with the shareholder and consulting fees incurred(9) with the operational review which was agreed to as part of the settlement. Management believes, when used as a supplement to GAAP results, that the exclusion of these costs will better help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to prior periods.

(10) The provision for income taxes is adjusted to reflect Commvault's estimated non-GAAP effective tax rate of 27%.

(11) This table includes the following financial metrics that are derived from Commvault's GAAP recognized revenue:

Subscription software and products revenue - The amounts included on this line include the software and product portion of a) non-cancellable term-based, or subscription, licenses that expire at the end of the contractual term; and b) "pay-as-you-go" utility arrangements based on product usage that are structured with no guaranteed minimums. These revenues are included in Software and Products Revenue on Commvault's Consolidated Statement of Operations.

Perpetual software and products revenue - The amounts included on this line are primarily associated with revenue from the sale of perpetual software licenses. These revenues are included in Software and Products Revenue on Commvault's Consolidated Statement of Operations.

Recurring support and services revenue - The amounts included on this line consist primarily of maintenance and support revenues associated with the sale of both subscription and perpetual software arrangements. This revenue is included in Services Revenue on Commvault's Consolidated Statement of Operations. This line also includes revenue from software-as-a-service arrangements.

Non-recurring services revenue - The amounts included on this line are primarily revenues associated with Commvault's installation and consultation services. These revenues are included in Services Revenue on Commvault's Consolidated Statement of Operations.

Management believes that reviewing these metrics, in addition to GAAP results, helps investors and financial analysts understand the recurring nature of certain revenue amounts and trends as compared to prior periods.

Note that nearly all of Commvault's software and product revenue is related to solutions that are run in the customer's environment. Commvault currently does not have material revenue related to hosted, or software as a solution products. As a result, as required under ASC 606, substantially all of Commvault's software and product revenue is recognized at a point in time, when it is delivered to the customer, and not ratably over the course of a contractual period. This is the case for both perpetual software licenses and subscription software licenses. Metallic, Commvault's software-as-a-service offering is recognized over time as services revenue.

Annualized Recurring Revenue (ARR) is defined as the annualized recurring value of all active contracts at the end of a reporting period. It includes the following contract types: subscription agreements (including utility), maintenance contracts related to perpetual licenses, other(12) extended maintenance contracts (enterprise support), managed services, and Metallic. It excludes any element of the deal arrangement that is not expected to recur, primarily perpetual licenses and most professional services. Contracts will be annualized by dividing the total contract value by the number of days in the contract term, then multiplying by 365.

ARR should be viewed independently of GAAP revenue, deferred revenue and unbilled revenue and is not intended to be combined with or to replace those items. ARR is not a forecast of future revenue. Management believes that reviewing this metric, in addition to GAAP results, helps investors and financial analysts understand the value of Commvault's recurring revenue streams versus prior periods.

Revenues on a constant currency basis are calculated using the average foreign exchange rates from a previous period and applying these rates to(13) foreign-denominated revenues in the corresponding period of fiscal 2021. The difference between revenue calculated based on these foreign exchange rates and revenues calculated in accordance with GAAP is listed as Adjustment for currency impact in the table above.

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SOURCE Commvault