“Our projected share count for Q3 is approximately 47 million shares.”

In context

“Brian Carolan (CFO): Thanks, Sanjay, and good morning, everyone. Hopefully, you had a chance to review the results we released this morning. Now, I will briefly recap and provide some additional color on the quarter. In fiscal Q2 '22, we reported total revenue of $178 million versus an increase of 4% year-over-year. Software and products revenue increased 4% year-over-year to approximately $75 million. As a reminder, in FY '22, we've moved to a software-only model. In Q2, software-only growth without hardware would have been approximately 9% year-over-year. Revenue from software transactions over $100,000 increased 6% year-over-year and represented 67% of software revenue. The volume of these transactions grew 9% year-over-year, and the average deal size was approximately $311,000. Software revenue from new business approximately doubled quarter-over-quarter and finished at the highest level in several years. Fiscal second quarter services revenue increased approximately 4% year-over-year to $103 million. The growth in services revenue is being driven primarily by Metallic. Let me now discuss our transition to a recurring revenue-based model. Second quarter subscription software revenue increased 24% year-over-year to approximately $48 million. Subscription licenses represented 63% of total software revenue, an increase from 53% a year ago. Total annual recurring revenue, or ARR, increased 12% year-over-year to approximately $543 million led by growth in new subscription customers and Metallic. As Sanjay noted, subscription and Metallic ARR of $278 million now represents 51% of total ARR and is growing at over 40% year-over-year. This is an important proof point in the transformation of our company. We believe ARR is the best measure of the underlying health of the business. It represents the strength of our land, expand, and renewal motions and is a barometer of our potential for future growth of our software and SaaS platform. Total recurring revenue, which includes subscription software, maintenance support services and SaaS, was $141 million, representing 79% of total revenue in the quarter. This compares to 75% in Q2 '21. Now, I'll discuss expenses and profitability. We reported fiscal second quarter gross margins of approximately 86%, an increase of 80 basis points year-over-year. The expansion of gross margin resulted from the decrease in pass-through hardware and royalties associated with the legacy version of our HyperScale products. These savings were partially offset by an increased mix of Metallic revenue, which carries a higher cost of sales, especially as we scale up the infrastructure. Total expenses, including both cost of sales and operating expenses, increased approximately 3% year-over-year to $145 million. Expense growth was driven by strategic investments in Metallic, a targeted ransomware campaign, and headcount additions. Non-GAAP EBIT was $31 million, and non-GAAP EBIT margins improved 50 basis points year-over-year to 17.4%. Now, I'll discuss cash flows and the balance sheet. For the quarter, we generated approximately $26 million of free cash flow. We ended the quarter with approximately $296 million in cash, and we have no debt on the balance sheet. Deferred revenue was $372 million, an increase of 14% year-over-year. Growth in deferred revenue was primarily driven by Metallic. During the quarter, we repurchased approximately 1.2 million shares of our common stock 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 September 30, we have repurchased approximately 3.4 million shares for $242 million. Now, I'll discuss our financial outlook for Q3 FY '22. For Q3, we expect software revenue of approximately $92 million. As Sanjay discussed earlier, we're winning new business, including competitive displacements. This new business may take longer to close, especially if part of larger IT transformation projects. In addition, we are modeling software more conservatively for any transactions tied to customers' delayed hardware orders. For modeling purposes, I'd like to remind you that Q4 software revenue historically approximates Q3 levels. We expect Q3 total revenue of approximately $195 million. Now, let's shift to expenses. We expect Q3 gross margins to be similar to Q2 levels or approximately 85% to 86%. We expect total expenses, including cost of sales and operating expenses, to be up approximately 2% year-over-year. This should result in EBIT margins of approximately 21% to 22%. Our projected share count for Q3 is approximately 47 million shares. With that, I will now turn the call back to Sanjay for some closing remarks.”