CommVault Systems Inc.
07/29/2026 | Press release | Distributed by Public on 07/29/2026 12:20
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis along with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026, as such risks and uncertainties may be updated from time to time in our periodic filings with the Securities and Exchange Commission. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
Commvault Systems, Inc. ("Commvault") is a provider of cyber resiliency solutions designed to help the enterprise protect, secure, and recover their data, applications, and identity systems in a world of increasing cyber threats and attacks. Commvault's offerings provide cyber resilience, including data protection, cyber recovery, data security, and governance, aiming to enable customers' continuous business.
Industry
Our industry continues to be reshaped by accelerating data growth, increasingly sophisticated cyberattacks, the rapid adoption of artificial intelligence ("AI"), and the expansion of hybrid, multi-cloud, cloud-native, and software-as-a-service ("SaaS") environments. Customers increasingly require a cyber resilience platform that brings together data security, identity resilience, real-time governance, threat detection, and verified clean recovery for structured and unstructured data, cloud-native applications, and AI workloads. Commvault Cloud is designed to help organizations secure, govern, and recover data and workloads anywhere to anywhere, while supporting compliance and operational resilience at scale.
Sources of Revenues
We generate revenues through subscription arrangements, which include term-based licenses, term-based support, and SaaS, as well as perpetual licenses, perpetual support, and other services. A significant portion of our revenues comes from subscription arrangements. These arrangements are economically and contractually similar, as customers generally receive access to our software for a specified term under binding agreements. We are focused on these types of recurring revenue arrangements.
We expect our subscription arrangements will continue to generate revenues from the renewals of term-based licenses, term-based support, and SaaS offerings sold in prior years. Any of our pricing models (capacity, instance-based, consumption, etc.) can be sold either through term-based licensing or cloud-based SaaS offerings. In term-based license arrangements, software revenue is generally recognized when the software is delivered or made available for download. Term-based support revenue and revenue related to our SaaS offerings are generally recognized ratably over the contract period or, in consumption arrangements, as the solutions are consumed.
Our term-based support and perpetual support revenues include support services for term-based license customers and support contracts for perpetual license customers, respectively. These support offerings include software updates on a when-and-if-available basis, telephone support, integrated web-based support, and other premium support offerings. We sell our customer support contracts as a percentage of net software purchases. Support revenue is recognized ratably over the term of the support agreement, which is typically one to three years for term-based support and one year for perpetual support.
Our other services revenue consists primarily of professional service offerings, including consultation, assessment and design, installation services, and customer education. Revenues related to other services can vary period over period based on the timing services are delivered and are typically recognized as the services are performed.
We sell to end-user customers both directly through our sales force and indirectly through our global network of value-added reseller partners, systems integrators, corporate resellers, original equipment manufacturers, and marketplaces. Revenues generated through indirect distribution channels accounted for approximately 90% of our total revenues in both the three months ended June 30, 2026 and 2025. Revenue generated through direct distribution channels accounted for approximately 10% of our total revenues in both the three months ended June 30, 2026 and 2025. Deals initiated by our direct sales force are sometimes transacted through indirect channels based on end-user customer requirements, which are not always in our control and can cause this overall percentage split to vary from period to period. As such, there may be fluctuations in the dollars and percentage of revenues generated through our distribution channels from time to time. We believe that the growth of our revenues, derived from both our indirect channel partners and direct sales force, are key attributes to our long-term growth strategy. We intend to continue to invest in both our channel relationships and direct sales force in the future, but we continue to expect more revenues to be generated through indirect distribution channels over the long term. The failure of our indirect distribution channels or our direct sales force to effectively sell our products and services could have a material adverse effect on our revenues and results of operations.
We have non-exclusive distribution agreements with certain partners who enable a more efficient and effective distribution channel for our solutions by managing our resellers and leveraging their own industry experience. For the three months ended June 30, 2026 and 2025, Partner A accounted for approximately 32% and 33% of our total revenues, respectively. Separately, Partner B accounted for approximately 11% of our total revenues for both the three months ended June 30, 2026 and 2025. If any of these partners were to discontinue or materially reduce their sales of our solutions, terminate their agreements with us, or experience operational or financial difficulties, and if we were unable to effectively replace them or assume management of the affected distribution activities, our business, revenues, and results of operations could be materially adversely affected.
We also sell our solutions through cloud-based marketplace offerings operated by third-party platform providers. Revenue from marketplace transactions are typically recorded on a gross basis, and amounts paid to the marketplace providers are capitalized as contract costs and amortized over the term of the related arrangement. Amortization of capitalized marketplace costs was $0.5 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively. Transactions through third-party cloud marketplace providers represented approximately 10% of our total revenues for the three months ended June 30, 2026 and less than 10% of our total revenues for the three months ended June 30, 2025. These transactions include sales to both new and existing customers and may include new purchases, renewals, expansions for existing customers, and subscriptions for both on-premise and SaaS offerings.
For additional information on how we recognize revenue, see Note 3 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Key Performance Indicators ($ in millions)
We monitor the following key performance indicators to help evaluate the state of our business. We believe the below metrics are material to investors to understand the growth and performance of our business, as they help normalize certain variable factors. Metrics such as Subscription Annualized Recurring Revenue ("Subscription ARR"), SaaS ARR, and Subscription Net Dollar Retention Rate ("Subscription NRR") provide a consistent view of our recurring revenue profile. Subscription ARR and SaaS ARR exclude non-recurring elements and reflect the annualized value of active contracts, while Subscription NRR measures net expansion within our existing Subscription customer base. Together, we believe these metrics offer meaningful insight into the health and trajectory of our recurring revenue streams. Total ARR, which also included the annualized maintenance contract on perpetual licenses, is no longer disclosed.
Subscription ARR
Subscription ARR represents the annualized value of all active contracts as of the end of a reporting period attributable to term-based licenses, maintenance and support services associated with term license arrangements, SaaS subscriptions, and consumption-based arrangements, calculated by dividing the total active contract value by the number of days in the contract term and multiplying the result by 365. For consumption-based arrangements on a pay as you go model without a fixed commitment, the applicable ARR is calculated by annualizing the revenue contractually expected to be received in a given month based on actual monthly usage from a prior month. We believe Subscription ARR provides useful insight into the growth of our subscription-based offerings and reflects both new customer acquisition and expansion within our existing customer base. As our most strategically significant and rapidly expanding revenue streams, our subscription arrangements are central to our long-term growth strategy and operational focus.
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Subscription ARR | $ | 1,054.3 | $ | 867.3 | ||||||||||
| % Growth | 22 | % | 32 | % | ||||||||||
SaaS ARR
SaaS ARR includes only the cloud-hosted portion of Subscription ARR and is calculated using the same methodology. We believe this metric provides insight into customer adoption trends and expansion within our cloud-based offerings. As SaaS continues to represent a growing share of our total revenue, we view this metric as a key indicator of our ability to meet the evolving needs of our customer base. Continued adoption and conversion to SaaS arrangements are critical to sustaining our long-term growth and aligning with customer preferences for cloud-delivered solutions.
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| SaaS ARR | $ | 424.3 | $ | 306.9 | ||||||||||
| % Growth | 38 | % | 63 | % | ||||||||||
Subscription NRR
Subscription NRR includes all contracts attributable to term-based licenses, maintenance and support services associated with term license arrangements, SaaS subscriptions, and consumption-based arrangements. Subscription NRR is calculated as the percentage of Subscription ARR retained from existing customers at the start of an annual period after accounting for expansion revenue, churn, and downgrades, measured on an annualized basis using the trailing four quarter average. Acquired Subscription ARR is excluded until the acquisition is fully integrated, which we generally expect to occur twelve months from the close date. We believe our Subscription NRR offers valuable insight into the year-over-year expansion of our existing customer base, reflecting both increased utilization of current products and services as well as the adoption of additional offerings.
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Subscription NRR | 114 | % | 114 | % | ||||||||||
These metrics are non-GAAP measures and do not have standardized definitions under GAAP. As such, they may not be comparable to similarly titled measures used by other companies and should be considered as a supplement to, and not as a substitute for, financial information prepared in accordance with GAAP. Management uses these metrics to assess the health of our recurring revenue base and to inform strategic decision-making. These metrics should be viewed independently of GAAP revenue, deferred revenue, and unbilled revenue and are not intended to be combined with or to replace those items.
Foreign Currency Exchange Rates' Impact on Results of Operations
Sales outside the United States were 45% and 44% of our total revenues for the three months ended June 30, 2026 and 2025, respectively. The income statements of our non-U.S. operations are translated into U.S. dollars at the average exchange rates for each applicable month in a period. To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency-denominated transactions generally results in increased revenues, operating expenses, and income from operations for our non-U.S. operations. Similarly, our revenues, operating expenses, and income from operations will generally decrease for our non-U.S. operations if the U.S. dollar strengthens against foreign currencies.
Using the average foreign currency exchange rates from the three months ended June 30, 2025, our total revenues would have been lower by $2.4 million, our cost of revenues would have been lower by $0.1 million, and our operating expenses would have been higher by $0.9 million from non-U.S. operations for the three months ended June 30, 2026.
In addition, we are exposed to risks of foreign currency fluctuation primarily from cash balances, accounts receivables, and intercompany accounts denominated in foreign currencies and are subject to the resulting transaction gains and losses, which are recorded as a component of general and administrative expenses. We recognized net foreign currency transaction gains of approximately $0.1 million and losses of approximately $1.2 million for the three months ended June 30, 2026 and 2025, respectively.
Critical Accounting Policies
In presenting our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"), we are required to make estimates and judgments that affect the amounts reported therein. Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable and appropriate. Actual results may differ significantly from these estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows may be affected.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application, while in other cases, significant judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions. We consider these policies requiring significant management judgment to be critical accounting policies. These critical accounting policies are:
•Revenue Recognition
•Accounting for Income Taxes
•Goodwill and Purchased Intangible Assets
There have been no significant changes in our critical accounting policies during the three months ended June 30, 2026 as compared to the critical accounting policies and estimates disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Results of Operations
Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding.
Three months ended June 30, 2026 compared to three months ended June 30, 2025
Revenues ($ in millions)
| Three Months Ended June 30, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| Subscription: | ||||||||||||||||||||
| Term-based license | $ | 110.4 | $ | 109.3 | 1 | % | ||||||||||||||
| Term-based support | 56.1 | 47.6 | 18 | % | ||||||||||||||||
| SaaS | 100.6 | 72.4 | 39 | % | ||||||||||||||||
| Total subscription | 267.0 | 229.3 | 16 | % | ||||||||||||||||
| Perpetual license | 8.7 | 7.3 | 19 | % | ||||||||||||||||
| Perpetual support | 25.5 | 31.4 | (19) | % | ||||||||||||||||
| Other services | 12.9 | 13.9 | (7) | % | ||||||||||||||||
| Total revenues | $ | 314.1 | $ | 282.0 | 11 | % | ||||||||||||||
Total revenues increased $32.2 million, or 11%, for the three months ended June 30, 2026, primarily driven by continued growth in subscription revenue, including term-based license, term-based support and SaaS offerings. Total subscription revenue increased $37.7 million, or 16%, and represented 85% of total revenue compared to 81% in the prior-year period, reflecting continued customer adoption of our subscription-based offerings.
SaaS revenue increased 39% year over year, driven by growth from both new and existing customers. Term-based support revenue increased 18% year over year, reflecting the maintenance and related support components of active term-based license contracts.
Term-based license revenue was relatively consistent with the prior-year period, increasing 1% year over year. Growth was led by a 13% increase in transactions less than $0.1 million, partially offset by a 2% decline in transactions greater than $0.1 million. Term-based license revenue may fluctuate from period to period based on renewal timing, contract duration, and seasonal purchasing patterns across our global markets. These increases were partially offset by a $6.0 million decrease in perpetual support revenue, consistent with our continued transition towards subscription-based offerings.
We track total revenues on a geographic basis. Our Americas region includes the United States, Canada, and Latin America. Our International region primarily includes Europe, the Middle East, Africa, Australia, India, and Southeast Asia. Americas and International represented 59% and 41% of our total revenues, respectively, for the three months ended June 30, 2026. Total revenues increased 9% and 15% year over year in the Americas and International regions, respectively.
The increase in Americas total revenues was primarily driven by 39% growth in SaaS revenue and 14% growth in term-based support revenue, reflecting continued growth in subscription-based offerings. These increases were partially offset by declines in perpetual support revenue and term-based license revenue.
The increase in International revenues was primarily driven by 38% growth in SaaS revenue, 26% growth in term-based support, and 7% growth in term-based license revenue. These increases were partially offset by a decrease in perpetual support revenue.
Our International revenues are subject to changes in foreign exchange rates as further discussed in the "Foreign Currency Exchange Rates' Impact on Results of Operations."
Cost of Revenues and Gross Margin ($ in millions)
| Three Months Ended June 30, | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
|
Cost of Revenues |
Gross Margin |
Cost of Revenues |
Gross Margin |
|||||||||||||||||
| Term-based license | $ | 4.2 | 96 | % | $ | 2.2 | 98 | % | ||||||||||||
| SaaS | 29.7 | 71 | % | 26.0 | 64 | % | ||||||||||||||
| Perpetual license | 0.2 | 98 | % | 0.2 | 97 | % | ||||||||||||||
| Customer support | 14.7 | 82 | % | 14.2 | 82 | % | ||||||||||||||
| Other services | 8.8 | 32 | % | 8.1 | 42 | % | ||||||||||||||
| Total cost of revenues | $ | 57.6 | 82 | % | $ | 50.8 | 82 | % | ||||||||||||
Total cost of revenues increased $6.8 million for the three months ended June 30, 2026, primarily due to increased infrastructure costs associated with the continued expansion of our SaaS offerings and, to a lesser extent, higher costs related to royalties tied to certain term-based license revenue. As a result, total gross margin was $256.5 million, or 81.7%, for the three months ended June 30, 2026.
Cost of SaaS revenue increased $3.7 million for the three months ended June 30, 2026, primarily due to higher infrastructure costs to support growth in our SaaS offerings. SaaS gross margin increased to 70.5% from 64.1% in the prior-year period, reflecting infrastructure and product optimization initiatives and improved economics under strategic agreements with our hyperscale cloud partners. As our SaaS business continues to represent a larger percentage of total revenue, changes in hosting cost, utilization, and operating efficiencies may have a meaningful impact on consolidated gross margin.
Operating Expenses ($ in millions)
| Three Months Ended June 30, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| Sales and marketing | $ | 139.8 | $ | 122.5 | 14 | % | ||||||||||||||
| Percentage of revenues | 45 | % | 43 | % | ||||||||||||||||
| Research and development | $ | 39.5 | $ | 40.1 | (1) | % | ||||||||||||||
| Percentage of revenues | 13 | % | 14 | % | ||||||||||||||||
| General and administrative | $ | 46.8 | $ | 41.3 | 13 | % | ||||||||||||||
| Percentage of revenues | 15 | % | 15 | % | ||||||||||||||||
-Sales and marketing expenses increased $17.3 million, or 14%, primarily driven by a $17.5 million increase in employee compensation and related expenses, including higher sales commissions, bonuses, and payroll taxes associated with increased headcount and higher revenue levels. Sales and marketing expenses also increased $1.6 million due to higher stock-based compensation. These increases were partially offset by a $2.0 million decrease related to the timing of certain in-person events and travel.
-Research and development expenses decreased $0.5 million, or 1%, driven by a $1.8 million decrease in employee compensation and related expenses, partially offset by $1.2 million in higher stock-based compensation.
-General and administrative expenses increased $5.5 million, or 13%, reflecting a $5.2 million increase in third-party consultants, primarily related to a strategic pricing and packaging initiative. In addition, employee compensation and related expenses increased $2.0 million, inclusive of $1.7 million in higher stock-based compensation. These increases were partially offset by a favorable year-over-year change in foreign currency impacts, as the prior-year period included a $1.2 million foreign currency transaction loss compared to a $0.1 million gain in the current period.
-Restructuring expenses were $2.4 million for the three months ended June 30, 2026. These charges relate to our restructuring plan initiated in the third quarter of fiscal 2026 and consist primarily of severance and associated costs from headcount reductions. These charges also include $0.6 million of stock-based compensation resulting from modifications to existing awards granted to certain employees. As of June 30, 2026, the majority of costs associated with this plan have been incurred and the remaining activities are anticipated to be completed in fiscal 2027. Restructuring expenses were $0.2 million for the three months ended June 30, 2025 related to a completed plan.
Interest Income
Interest income was $7.7 million in the three months ended June 30, 2026 compared to $2.0 million in the three months ended June 30, 2025. The increase was primarily driven by investments in money market funds beginning in the third quarter of fiscal 2026.
Income Tax Expense
Our effective tax rate ("ETR") was 34.4% and 12.6% for the three months ended June 30, 2026 and 2025, respectively. The increase in ETR as of June 30, 2026 compared to the prior year was primarily due to changes in the mix of our earnings and tax expenses between the U.S. and foreign countries, as well as changes in the tax impact of stock-based compensation.
Liquidity and Capital Resources
As of June 30, 2026, our cash and cash equivalents balance was $929.8 million, of which approximately $323.6 million was held outside of the United States by our foreign legal entities. These balances are dispersed across approximately 35 international locations. We believe that such dispersion meets the current and anticipated future liquidity needs of our foreign legal entities. In the event we need to repatriate funds from outside of the United States, such repatriation would likely be subject to restrictions by local laws and/or tax consequences, including foreign withholding taxes. Our cash and cash equivalents consisted of cash deposits and money market funds, which are highly liquid and are intended to support our operating, investing and financing needs.
We maintain a $300.0 million senior secured revolving credit facility that expires in April 2030 (the "Credit Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The Credit Facility is available for share repurchases, general corporate purposes, and letters of credit, and is subject to financial maintenance covenants and other customary terms and conditions. As of June 30, 2026, there were no borrowings under the Credit Facility and we were in compliance with all covenants. See Note 12 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details of the Credit Facility.
We had $900.0 million aggregate principal amount of senior, unsecured convertible notes (the "Notes") outstanding as of June 30, 2026. The Notes do not bear regular interest; however, special interest and additional interest, if any, may accrue on the Notes upon the occurrence of certain events as described in the Indenture. The Notes mature on September 15, 2030, unless earlier converted, redeemed, or repurchased. There are no required principal payments on the Notes prior to their maturity. Upon conversion, consideration due will consist of cash, up to the principal amount of the Notes to be converted, and, for any conversion value in excess of principal, cash or shares of our common stock, at our election. See Note 12 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details of the Notes.
On April 15, 2026, the Board approved recommitting the existing share repurchase program so that $250.0 million was available. For the three months ended June 30, 2026, we repurchased $10.1 million of our common stock. The remaining amount available under the share repurchase program as of June 30, 2026 was $239.9 million.
Our summarized cash flow information is as follows (in millions):
| Three Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net cash provided by operating activities | $ | 51.7 | $ | 31.7 | ||||||||||
| Net cash provided by (used in) investing activities | (8.5) | 26.8 | ||||||||||||
| Net cash used in financing activities | (10.2) | (16.9) | ||||||||||||
| Effects of exchange rate - changes in cash | (3.2) | 19.5 | ||||||||||||
| Net increase in cash and cash equivalents | $ | 29.8 | $ | 61.1 | ||||||||||
-Net cash provided by operating activities was driven by net income adjusted for non-cash charges and a decrease in accounts receivable, partially offset by a decrease in accrued liabilities. Cash from operating activities can fluctuate period-to-period, including when customer payments are received and when certain expenses are paid. These working capital impacts are primarily timing-based and reflect the normal course of our business operations. Management considers operating cash flow trends over multiple periods, as quarterly results may reflect normal variability in billing and collection cycles.
-Net cash used in investing activities was the result of $7.9 million for the purchase of investments and $0.6 million of capital expenditures.
-Net cash used in financing activities was primarily the result of $10.1 million of repurchases of our common stock.
Working capital increased $18.6 million from $628.3 million as of March 31, 2026 to $646.9 million as of June 30, 2026. The net increase in working capital was primarily the result of decreases in accrued liabilities and the current portion of deferred revenue partially offset by a decrease in accounts receivable.
Our primary cash needs over the next twelve months and longer term include working capital requirements, income taxes, capital expenditures, potential stock repurchases, and the potential cash portion of consideration upon conversion or at maturity of the Notes. We have discretion to settle conversion consideration above principal in cash, stock, or a combination; the timing and amount of any related cash outflows will depend on our stock price, conversion activity, and our financing strategy. We believe our existing cash and cash flows from operations are sufficient to meet these cash requirements for at least the next twelve months.
Impact of Recently Issued Accounting Standards
See Note 2 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of the impact of recently issued accounting standards.
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