“Given our record Q4 2021 results and our current Q1 2022 outlook, we remain confident that we're on track to deliver against the near-term targets that we outlined during the January investor event.”

In context

“Brian Carolan (Chief Financial Officer): Thanks, Sanjay, and good morning, everyone. Hopefully, you had a chance to review our fourth quarter and full year results we released early this morning. We once again set numerous records this past quarter, and fiscal year 2021 represented a breakout year for Commvault. We're entering FY 2022 with wind at our backs, but before I discuss our Q1 2022 outlook, I'll review the results for the quarter and the full year. Fourth quarter total revenue was a record $191 million, up 16% year-over-year; for the full year, total revenue increased 8% to $723 million. Fourth quarter software and products revenue increased 35% year-over-year to $89.4 million, marking another quarterly record; for the full year, software products revenue rose 19% to approximately $327 million. Large deals represented 69% of software revenue in the quarter compared to 67% a year ago. Revenue from software transactions over $100,000 increased 39% year-over-year to a quarterly record of $62 million. The volume of these transactions increased 30% year-over-year, and the average deal size was approximately $313,000. We closed multiple seven-figure deals in the quarter led by the Americas. We also saw continued improvement in deals under $100,000. Revenue from these transactions grew 26% year-over-year with increases across all three regions. Fiscal fourth quarter services revenue increased approximately 4% year-over-year to $102 million, growth was driven primarily by improvements in professional services and Metallic. For the full year, services revenue was flat at approximately $397 million; this was the result of our efforts to strategically transition certain perpetual maintenance customers to subscription licensing arrangements. We believe these conversions benefit us over the long term because of the associated opportunity to drive higher lifetime value with an active customer. Let me now discuss our accelerated transition to a recurring revenue-based model. As a reminder, FY 2021 was the first significant year of our subscription renewal cycle, which represented a positive inflection point in our transition. We expect subscription renewals to continue to be a revenue tailwind for the next several years. Fourth quarter subscription software revenue more than doubled year-over-year and represented 59% of total software revenue. We added over 200 subscription customers in the quarter. For the full year, subscription revenue increased 70% year-over-year and also represented 59% of total software revenue. The subscription net dollar retention rate exceeded 110% for both the quarter and the full year. Total Q4 recurring revenue, which includes subscription software, maintenance support services, and SaaS, increased approximately 24% year-over-year to $146 million and represented 76% of total revenue in the quarter. For the full year, recurring revenue grew 17% to $556 million and represented 77% of total revenue. Annual recurring revenue or ARR increased 15% year-over-year to approximately $518 million during the quarter; Metallic ARR more than doubled sequentially and meaningfully contributed to the sequential increase in consolidated ARR. Now I'll discuss expenses and profitability. In Q4, we reported gross margins of 85%. For the full year, gross margins improved approximately 240 basis points to 85.3%. I'm happy to report, we sold through our remaining hardware inventory in Q4 2021, and we enter FY 2022 as a software and services-only model. Q4 FY 2021 total expenses, including both cost of sales and operating expenses, increased 4% year-over-year to $150 million. For the full year, total expenses increased 1% to $577 million. Fourth quarter EBIT more than doubled year-over-year to approximately $39 million, representing a margin of 20.3%. For the full year, EBIT grew 57% to $137 million. Full-year EBIT margin was 19%, representing a 600 basis points year-over-year improvement. Now I'll discuss cash flows and the balance sheet. For the quarter, we generated approximately $63 million of free cash flow. Q4 free cash flow was favorably impacted by our record Q3 performance, the timing of our bi-weekly U.S. payroll in late December, and the receipt of IRS tax refunds associated with the CARES Act. We ended the quarter with $397 million in cash and cash equivalents and continue to have no debt on the balance sheet. As we mentioned during our January investor event, through FY 2022, we're committed to repurchasing stock equal to $200 million plus 75% of annual free cash flow. From our investor event through the end of the quarter, we repurchased approximately 943,000 shares for $62 million. Now I'll discuss our financial outlook for Q1 FY 2022. For the first quarter of FY 2022, we expect software and products revenue of approximately $81 million and total revenue of approximately $181 million. As a reminder, in Q1 of fiscal 2021, Commvault closed its largest single deal in company history. Now let's shift to expenses. We expect Q1 2022 total expenses to be up approximately 7% year-over-year, resulting in EBIT margins of approximately 18% to 19%. Please remember that Q1 FY 2021 benefited from numerous one-time temporary expense reductions during the depths of the lockdown, including temporary salary reductions, lower T&E, and lower healthcare costs. This creates a more challenging year-over-year comparison on the expense side. Our projected share count for Q1 is approximately 48 million shares. Given our record Q4 2021 results and our current Q1 2022 outlook, we remain confident that we're on track to deliver against the near-term targets that we outlined during the January investor event. Our belief is underpinned by the following: first, we're landing new subscription customers and taking market share; second, subscription renewals are a tailwind; we estimate the FY 2022 software subscription renewal opportunity to be approximately $80 million, this compares to approximately $50 million in FY 2021. The opportunity is weighted about 60% toward the back half of the year, with Q1 representing approximately $17 million. Third, our retention and expansion motion works; our subscription net dollar retention rate currently exceeds 110%, and we're seeing existing customers adopt more of our intelligent data services at a faster pace. Finally, the Metallic effect has arrived; the combination of on-premise and SaaS is resonating with customers. We expect Metallic to be a meaningful contributor to incremental ARR growth each quarter. While we are pleased with where we are today, we want to remind you that there may be quarterly variability in our results as we progress toward these targets. And while we have made significant progress, we are still in a period of transformation and there remains work to be done during a period of global uncertainty.”