“Our projected share count for Q4 is approximately 46.5 million shares.”

In context

“Brian Carolan (CFO): Thanks, Sanjay. And good morning, everyone. Hope you had a chance to review the results we released this morning. I will briefly recap and provide some additional color on the quarter. In fiscal Q3 '22, we reported total revenue of $202 million, an increase of 8% year-over-year. Q3 marked the first time in company history that we exceeded $200 million in quarterly revenue, a milestone for Commvault. Software and products revenue increased 11% year-over-year to approximately $99 million. As a reminder, in FY ‘22, we've moved primarily to a software-only model. In Q3, software-only growth, excluding appliance pass-through revenue, was approximately 13% year-over-year. Revenue from software transactions over $100,000 increased 24% year-over-year and represented a record 76% of software revenue. The volume of these transactions grew 20% year-over-year and the average deal size increased 3% to approximately $332,000. As Sanjay noted, we closed numerous seven-figure deals in the quarter. In Q3, we had the highest number of new customer additions in years across all products, driven by our Americas and EMEA regions. In addition to our new customer success, business from existing customers reached an all-time high during the quarter. Taken together, the pace of both new and existing business further validates the success of our emerging land and expand motion. Let me now discuss our accelerating transition to a recurring revenue-based model. Third-quarter subscription software revenue increased 45% year-over-year to approximately $70 million. Subscription licenses represented 71% of total software revenue, an increase from 63% last quarter and 55% a year ago. We are clearly benefiting from the tailwinds of our subscription transition and our growing recurring revenue model. Total annual recurring revenue, or ARR, increased 11% year-over-year to approximately $561 million. On a constant currency basis, ARR was up 13% year-over-year. ARR growth is being driven by new subscription customers and Metallic. As Sanjay noted earlier, subscription and Metallic ARR grew 45% year-over-year to $309 million, and now represents 55% of total ARR, up from 51% last quarter and 46% a year ago. This is an important proof point in the transformation of our company. We believe ARR is a good 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. Total recurring revenue, which includes subscription software, maintenance support services, and SaaS grew 17% year-over-year to $164 million. Recurring revenue represented 81% of total revenue in the quarter, an increase from 79% last quarter and 74% a year ago. Now I'll discuss expenses and profitability. We reported fiscal third-quarter gross margins of approximately 86%, an increase of 40 basis points year-over-year. The expansion of gross margin was the result of 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 SaaS revenue, which carries a higher cost of sales. We expect Metallic gross margins to improve over time with increased economies of scale. Total expenses, including both costs of sales and operating expenses, increased approximately 6% year-over-year to $157 million. Expense growth was driven by increased third-party marketing spend, field compensation on record bookings, and strategic investments in Metallic. Non-GAAP EBIT was a record $43 million, and non-GAAP EBIT margins improved 150 basis points year-over-year to 21.3%. 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 $234 million in cash, of which over 70% sits overseas. As Sanjay mentioned, we announced a technology and talent-driven acquisition of an overseas firm to enhance our ransomware protection capabilities. The purchase price is approximately $17 million and will be funded entirely from our foreign cash balance. We expect the deal to close in fiscal Q4. We currently have no debt on the balance sheet. During the quarter, we opened a new $100 million revolving credit facility to provide additional financial flexibility. In Q3, we repurchased approximately 1.3 million shares of our common stock for $85 million. Since our investor event in January 2021 through December 31, we repurchased approximately 4.6 million shares for $328 million, exceeding our initial guidance of $200 million, plus 75% of free cash flow. Now I'll discuss our financial outlook for Q4 FY '22. We saw accelerating momentum throughout Q3. As Sanjay articulated, we believe that the industry and our business are healthy. At this point in the quarter, our pipeline is in good shape and it's always an area of focus for us. We are working diligently to further our market share gains and leadership position. Against this backdrop, we are raising fiscal Q4 revenue guidance. We expect Q4 software revenue of approximately $97 million and total revenue of approximately $202 million. Now let's shift to expenses. We expect Q4 gross margins to be flat year-over-year or approximately 85%. We expect total expenses, including costs of sales and operating expenses to be up approximately 6% year-over-year. Q4 expenses reflect a seasonal FICA tax reset, annual merit increases, and go-to-market investments. We anticipate that this will result in EBIT margins of approximately 20%. Our projected share count for Q4 is approximately 46.5 million shares.”