PR Newswire | Oct 27, 2020 07:46AM EDT

10/27 06:45 CDT

Commvault Announces Fiscal 2021 Second Quarter Financial Results-- Annualized recurring revenue (ARR) up 9% year over year ---- Second quarter software and products revenue up 5% year over year ---- Recurring revenue up 6% year over year -- TINTON FALLS, N.J., Oct. 27, 2020

TINTON FALLS, N.J., Oct. 27, 2020 /PRNewswire/ --

Second quarter highlights include:



Second quarter

GAAP Results:

Revenues $171.1 million

Loss from Operations (EBIT) $(42.0) million

Operating Margin (24.5)%

Diluted Loss Per Share $(0.89)



Non-GAAP Results:

Income from Operations (EBIT)$28.9 million

EBIT Margin 16.9%

Diluted Earnings Per Share $0.45

Commvault [NASDAQ: CVLT] today announced its financial results for the second quarter ended September 30, 2020.

"We are pleased by this quarter's solid financial performance and are on track to deliver continued growth and operating margin expansion," said Sanjay Mirchandani, President and CEO, Commvault. "The Commvault portfolio has never been stronger. New product announcements including Commvault HyperScale X, Commvault Disaster Recovery, and Metallic Cloud Storage Service represent a series of first-mover advantages, addressing critical needs like cloud transformation and ransomware."

Total revenues for the second quarter of fiscal 2021 were $171.1 million, an increase of 2% year over year and a decrease of 1% sequentially. Total recurring revenue was $129.1 million, an increase of 6% year over year.

Annualized recurring revenue (ARR), which is the annualized value of all active Commvault recurring revenue streams at the end of the reporting period, was $483.5 million as of September 30, 2020, up 9% from September 30, 2019.

Software and products revenue was $72.3 million, an increase of 5% year over year and a decrease of 6% sequentially. The year over year increase in software and products revenue was driven by an 8% increase in larger deals (deals greater than $0.1 million in software and products revenue).

Services revenue in the quarter was $98.8 million, flat year over year and an increase of 2% sequentially.

On a GAAP basis, loss from operations was $42.0 million for the second quarter compared to a loss of $8.2 million in the prior year. The current quarter loss was driven by $40.7 million of non-cash impairment charges of intangible assets recognized in the acquisition of Hedvig, Inc. The impairments are primarily due to a moderated view of the acquisition assumptions. The Hedvig technology has now been fully integrated into Hyperscale X software and appliances. The integration of this technology will lessen reliance on third party vendors, begin driving meaningful gross margin expansion on our Hyperscale technology, and improve the customer experience. Non-GAAP EBIT, which excludes the non-cash impairment charges, was $28.9 million in the quarter compared to $24.8 million in the prior year.

Operating cash flow totaled $27.0 million for the second quarter of fiscal 2021 compared to $24.0 million in the prior year quarter. Total cash and short-term investments were $394.0 million as of September 30, 2020 compared to $339.7 million as of March 31, 2020.

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 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 2020, Commvault also excluded costs related to a non-routine shareholder matter. Commvault has also excluded the noncash amortization and impairment of intangible assets and certain costs related to key employees of Hedvig 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 incorporate 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 InformationCommvault will host a conference call today, October 27, 2020, 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 CommvaultCommvault 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 2,500 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 StatementThis 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)1999-2020 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 September 30,Six Months Ended September 30,

2020 2019 2020 2019

Revenues:

Software and products $ 72,309 $ 68,595 $ 148,863 $132,269

Services 98,830 98,987 195,276 197,516

Total revenues 171,139 167,582 344,139 329,785

Cost of revenues:

Software and products 7,903 8,831 13,750 14,861

Services 18,896 22,410 37,600 45,100

Total cost of revenues 26,799 31,241 51,350 59,961

Gross margin 144,340 136,341 292,789 269,824

Operating expenses:

Sales and marketing 79,069 80,960 160,745 168,345

Research and development 30,955 23,227 62,097 46,807

General and administrative 24,748 24,753 46,307 47,260

Restructuring 5,767 12,851 8,091 16,930

Impairment of intangible assets 40,700 - 40,700 -

Depreciation and amortization 5,053 2,719 10,118 5,325

Total operating expenses 186,292 144,510 328,058 284,667

Loss from operations (41,952) (8,169) (35,269) (14,843)

Interest income 249 1,561 592 3,484

Loss before income taxes (41,703) (6,608) (34,677) (11,359)

Income tax expense (benefit) (532) 476 4,211 2,571

Net loss $ (41,171) $ (7,084) $ (38,888) $(13,930)

Net loss per common share:

Basic $ (0.89) $ (0.16) $ (0.84) $(0.31)

Diluted $ (0.89) $ (0.16) $ (0.84) $(0.31)

Weighted average common shares outstanding:

Basic 46,516 45,277 46,354 45,363

Diluted 46,516 45,277 46,354 45,363

Table II



Commvault Systems, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)



September 30,March 31,

2020 2020

ASSETS

Current assets:

Cash and cash equivalents $383,153 $288,082

Restricted cash - 8,000

Short-term investments 10,845 43,645

Trade accounts receivable, net 138,957 146,990

Other current assets 26,038 26,969

Total current assets 558,993 513,686



Property and equipment, net 113,014 114,519

Operating lease assets 18,691 15,009

Deferred commissions cost 32,726 31,394

Intangible assets, net - 46,350

Goodwill 112,435 112,435

Other assets 16,119 11,683

Total assets $851,978 $845,076



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $253 $307

Accrued liabilities 79,112 87,051

Current portion of operating lease liabilities7,563 7,699

Deferred revenue 227,777 233,497

Total current liabilities 314,705 328,554



Deferred revenue, less current portion 97,506 92,723

Deferred tax liabilities, net 739 849

Long-term operating lease liabilities 12,574 8,808

Other liabilities 6,978 2,238



Total stockholders' equity 419,476 411,904

Total liabilities and stockholders' equity $851,978 $845,076

Table III



Commvault Systems, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)



Three Months Ended Six Months Ended September 30, September 30,

2020 2019 2020 2019

Cash flows from operating activities

Net loss $(41,171)$(7,084)$(38,888)$(13,930)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 5,365 3,136 10,743 6,054

Noncash stock-based compensation 20,584 14,857 39,535 29,607

Impairment of intangible assets 40,700 - 40,700 -

Amortization of deferred commissions cost 4,959 4,227 9,526 8,730

Impairment of operating lease assets 225 1,332 692 2,050

Changes in operating assets and liabilities:

Trade accounts receivable 15,021 2,460 3,637 45,625

Operating lease assets and liabilities, net (288) (806) (808) 42

Other current assets and Other assets 2,693 4,085 9,982 (1,796)

Deferred commissions cost (4,319) (3,593) (9,965) (6,962)

Accounts payable 92 792 (67) (425)

Accrued liabilities (9,452) 9,023 (17,151) (1,015)

Deferred revenue (9,679) (4,157) (10,222) (12,079)

Other liabilities 2,227 (293) 4,528 (782)

Net cash provided by operating activities 26,957 23,979 42,242 55,119

Cash flows from investing activities

Purchase of short-term investments - - - (32,800)

Proceeds from maturity of short-term investments - 32,706 32,800 65,519

Purchase of property and equipment (2,019) (616) (3,662) (1,457)

Net cash provided by (used in) investing activities (2,019) 32,090 29,138 31,262

Cash flows from financing activities

Repurchase of common stock - - - (40,026)

Proceeds from stock-based compensation plans 5,040 5,662 5,271 6,325

Net cash provided by (used in) financing activities 5,040 5,662 5,271 (33,701)

Effects of exchange rate - changes in cash 7,743 (4,927) 10,420 (3,047)

Net increase in cash, cash equivalents and restricted cash 37,721 56,804 87,071 49,633

Cash, cash equivalents and restricted cash at beginning of period 345,432 320,821 296,082 327,992

Cash, cash equivalents and restricted cash at end of period $383,153 $377,625$383,153 $377,625

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 Six Months Ended September 30, September 30,

2020 2019 2020 2019

Non-GAAP financial measures and reconciliation:

GAAP loss from operations $(41,952)$(8,169)$(35,269)$(14,843)

Noncash stock-based compensation (1) 19,937 14,252 38,831 28,634

FICA and payroll tax expense related to stock-based compensation (2)188 225 520 640

Restructuring (3) 5,767 12,851 8,091 16,930

Non-routine shareholder matters (4) - 4,325 - 7,628

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

Hedvig deferred payments (6) 1,406 - 2,812 -

Acquisition costs (7) - 1,283 - 1,283

Impairment of intangible assets (8) 40,700 - 40,700 -

Non-GAAP income from operations $28,871 $24,767 $61,335 $40,272



GAAP net loss $(41,171)$(7,084)$(38,888)$(13,930)

Noncash stock-based compensation (1) 19,937 14,252 38,831 28,634

FICA and payroll tax expense related to stock-based compensation (2)188 225 520 640

Restructuring (3) 5,767 12,851 8,091 16,930

Non-routine shareholder matters (4) - 4,325 - 7,628

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

Hedvig deferred payments (6) 1,406 - 2,812 -

Acquisition costs (7) - 1,283 - 1,283

Impairment of intangible assets (8) 40,700 - 40,700 -

Non-GAAP provision for income taxes adjustment (9) (8,394) (6,633) (12,509) (9,244)

Non-GAAP net income $21,258 $19,219 $45,207 $31,941



Diluted weighted average shares outstanding 47,106 45,718 46,821 45,946

Non-GAAP diluted net income per share $0.45 $0.42 $0.97 $0.70

Three Months Ended Six Months Ended September 30, September 30,

2020 2019 2020 2019

Subscription and Utility Software and Related Support Services$53,045 $40,405 $116,664$72,694

Recurring Support and Services 76,044 81,372 153,516 163,217

Total Recurring Revenue $129,089$121,777$270,180$235,911

Percentage of Total Revenues 75% 73% 79% 72%



Perpetual Software and Product Revenue $33,914 $37,852 $59,274 $77,969

Other Professional Services 8,136 7,953 14,685 15,905

Total Non-recurring Revenue $42,050 $45,805 $73,959 $93,874

Percentage of Total Revenues 25% 27% 21% 28%



Total Revenue (10) $171,139$167,582$344,139$329,785

Measures at period ending ($000s)

September 30, 2019March 31, 2020September 30, 2020

Annualized Recurring Revenue (11)$ 443,064 $451,667 $ 483,455



Three Months Ended September 30, 2020

Americas EMEA APJ Total

Software and Products Revenue$39,241$22,063$11,005$72,309

Customer Support Revenue 54,177 24,911 10,359 89,447

Other Services Revenue 4,794 3,084 1,505 9,383

Total Revenue $98,212$50,058$22,869$171,139



Three Months Ended September 30, 2019

Americas EMEA APJ Total

Software and Products Revenue$35,863$21,440$11,292$68,595

Customer Support Revenue 57,864 21,906 10,233 90,003

Other Services Revenue 4,430 2,680 1,874 8,984

Total Revenue $98,157$46,026$23,399$167,582



Six Months Ended September 30, 2020

Americas EMEA APJ Total

Software and Products Revenue$89,886 $40,858$18,119$148,863

Customer Support Revenue 109,415 48,221 20,454 178,090

Other Services Revenue 8,907 5,639 2,640 17,186

Total Revenue $208,208$94,718$41,213$344,139



Six Months Ended September 30, 2019

Americas EMEA APJ Total

Software and Products Revenue$67,084 $42,815$22,370$132,269

Customer Support Revenue 115,594 43,573 20,318 179,485

Other Services Revenue 9,296 5,362 3,373 18,031

Total Revenue $191,974$91,750$46,061$329,785



Three Months Ended Six Months Ended September 30, 2020 September 30, 2020

SequentialYear Over YearYear Over Year

Non-GAAP software and products revenue reconciliation

GAAP software and products revenue $72,309 $72,309 $148,863

Adjustment for currency impact (1,441) (1,118) (709)

Non-GAAP software and products revenue on a constant currency basis (12)$70,868 $71,191 $148,154



Three Months Ended Six Months Ended September 30, 2020 September 30, 2020

SequentialYear Over YearYear Over Year

Non-GAAP services revenue reconciliation

GAAP services revenue $98,830 $98,830 $195,276

Adjustment for currency impact (2,281) (1,618) (425)

Non-GAAP services revenue on a constant currency basis (12) $96,549 $97,212 $194,851



Three Months Ended Six Months Ended September 30, 2020 September 30, 2020

SequentialYear Over YearYear Over Year

Non-GAAP total revenue reconciliation

GAAP total revenues $171,139$171,139 $344,139

Adjustment for currency impact (3,722) (2,736) (1,134)

Non-GAAP total revenues on a constant currency basis (12) $167,417$168,403 $343,005

Footnotes - Adjustments



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

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Cost of services revenue $ 740 $ 698 $1,406 $1,388

Sales and marketing 8,988 7,359 16,192 15,005

Research and development 5,578 2,011 11,519 4,004

General and administrative 4,631 4,184 9,714 8,237

Stock-based compensation expense$ 19,937 $ 14,252 $38,831 $28,634

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 fiscal 2019, Commvault initiated a restructuring plan 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 headcount reductions, as well as the (3) 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.



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 with the operational review which was agreed to as part of the (4) 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.



(5) Represents noncash amortization of intangible assets.



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' ownership of Hedvig, under GAAP they are (6) 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.



During the second quarter of fiscal 2020, Commvault incurred costs related to the acquisition of Hedvig, Inc. Management believes, when used as a supplement to GAAP results, that the (7) exclusion of these costs will help investors and financial analysts understand Commvault's operating results and underlying operational trends as compared to other periods.



In the second quarter of fiscal 2021, Commvault recorded impairment of its acquired intangible assets. These non-cash charges are not representative of ongoing costs to the business and (8) 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.



The provision for income taxes is adjusted to reflect Commvault's estimated (9) non-GAAP effective tax rate of 27%.



This table includes the following financial metrics that are derived from (10)Commvault's GAAP recognized revenue:



Subscription and Utility Software and Related Support Services - The amounts included on this line include a) non-cancellable term-based, or subscription, licenses (inclusive of both recognized software and recognized maintenance and support revenues) that expire at the end of the contractual term; and b) "pay-as-you-go" utility arrangements based on product usage (inclusive of both recognized software and maintenance and support revenues) that are structured with no guaranteed minimums. The amount includes both Software and Products Revenue and Services Revenue.



Recurring Support and Services - The amounts included on this line consist primarily of maintenance and support revenues associated with the sale of perpetual software arrangements. This revenue is included in Services Revenue on Commvault's Consolidated Statement of Operations.



Perpetual Software and Product Revenues - 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.



Other Professional Services - 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.



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 extended (11)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.



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 foreign-denominated revenues in the (12)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