“Looking further out, we expect subscription renewals will continue to be a revenue tailwind for the next several years.”

In context

“Brian Carolan (Chief Financial Officer): Thanks, Sanjay, and good morning, everyone. Hopefully, you had a chance to review the results we released earlier this morning. Coming off our record fiscal '21 performance and into the first quarter of fiscal '22, we are off to a solid start. I will briefly recap the results. In fiscal Q1 '22, we reported total revenue of $183 million, an increase of 6% year-over-year. Software and products revenue increased 7% year-over-year to approximately $82 million. As a reminder, we've moved to a software-only model. In Q1, software-only growth without hardware would have been approximately 11% year-over-year. Revenue from software transactions over $100,000 increased 2% year-over-year and represented 69% of software revenue. The volume of these transactions increased 34% year-over-year, and the average deal size was approximately $305,000. Please note that in Q1 '21, we recorded the single largest subscription software deal in our company's history, which made for a challenging comparison this quarter. Our unbundled portfolio and usage-based pricing is resonating with small and medium enterprise customers, and we saw continued improvement in software deals under $100,000. Revenue from these transactions grew 23% year-over-year, led by the Americas and EMEA. Fiscal first-quarter services revenue increased approximately 5% year-over-year to $101 million. The growth in services revenue is being driven primarily by Metallic. We also saw improvement in professional services revenue as we delivered services attached to the strong software results in the second half of the prior fiscal year. Let me now discuss our transition to a recurring revenue-based model. First quarter subscription software revenue of approximately $50 million represented 60% of total software revenue. Our subscription ARR net dollar retention rate continues to exceed 110%. Total annual recurring revenue, or ARR, increased 13% year-over-year to approximately $533 million. The sequential increase was driven largely by new subscription customers and strong growth from Metallic. Total recurring revenue, which includes subscription software, maintenance support services, and SaaS, was $142 million, representing 78% of total revenue in the quarter. Now I'll discuss expenses and profitability. We reported fiscal first-quarter gross margins of approximately 87%, a 70 basis point improvement year-over-year. The increase was driven by the absence of pass-through hardware sales versus a year ago and the reduction of certain third-party royalties that were associated with our legacy hyperscale products. Total expenses, including both cost of sales and operating expenses, increased 1% year-over-year to $140 million. Our spending was lower than expected, mostly because of the timing of headcount investments. The timing of hiring of certain positions was impacted by COVID. We have already started catching up in Q2. Our solid revenue growth and lower-than-expected expenses resulted in non-GAAP EBIT of approximately $41 million or 26% growth year-over-year. Non-GAAP EBIT margin improved 360 basis points year-over-year to 22.4%. Now I'll discuss cash flows and the balance sheet. For the quarter, we generated approximately $36 million of free cash flow tied to our strong EBIT performance and the collection of receivables from Q4 '21. We ended the quarter with approximately $359 million in cash and continue to have no debt on the balance sheet. We expect a seasonal sequential decline in Q2 operating cash flow as a result of lower concentration of perpetual maintenance renewals in the first half of the fiscal year. During the quarter, we repurchased approximately 1.2 million shares for $90 million. As we outlined during our investor event in January, through FY '22, we are committed to spend $200 million plus 75% of fiscal '22 free cash flow on share repurchases. Since the investor event and through June 30, we have repurchased approximately $152 million worth of our common stock at an average share price of approximately $69.50. Now I'll discuss our financial outlook for Q2 FY '22. We believe current street consensus of approximately $83 million of software revenue for Q2 is reasonable. This would imply year-over-year software growth of 14%. Please note that the prior year second quarter included approximately $3 million of pass-through hardware, which we don't expect to have this quarter. On a software-only basis, $83 million of revenue would be approximately 20% year-over-year growth. We also believe that the current street consensus for total revenue of approximately $184.5 million is reasonable. Similar to last fiscal year, we expect the Q2 '22 software subscription renewal opportunity to be several million dollars less than Q1. For the full fiscal year, we estimate a renewal opportunity of $80 million, with about 60% of this being in the second half of the year. Looking further out, we expect subscription renewals will continue to be a revenue tailwind for the next several years. As a reminder, Q2 is also typically a challenging quarter from a seasonality perspective. And as organizations return to the office, we could see some shift in IT priorities given the additional strain on customers' already limited resources. This could impact the timing of large deal closures. Now let's shift to expenses. We expect Q2 gross margins to be approximately 86% to 87% and total expenses, including both cost of sales and operating expenses, to be up approximately 4% year-over-year. This should result in EBIT margins approaching 20%. We plan to add resources to strategic areas like Metallic, our center of excellence in India, and go-to-market. These investments are incorporated in our near-term expectations. In addition, we expect some of the temporary COVID-related savings to continue to normalize. Our projected share count for Q2 is approximately 48 million shares. With that, I will now turn the call back over to Sanjay for some closing remarks.”