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Commvault Earning Results Drive Positive Position

Written on: Nov 2, 2017 12:00:00 PM

Written by: Alex Raben

Topic

[Commvault]

Recent earning results demonstrate Commvault remains a favourite solution for 2017 onwards.

Research on Commvault activities have shown strong results and a positive outlook for Commvault, please read more in this brief article.

Overview

Commvault remains a favourite idea for 2017. Enterprise deal sizes are expanding (+8% q/q) as customers appear to be moving incremental capacity/applications to the platform for management of hybrid cloud environments. Improved tone on F2018 guidance and commentary related to recapturing 20% operating margin by F2020 should address leverage concerns. Raising our target to $63 on 22x EV/FCF; the historical range is 17x to 36x.

What Happened

Commvault experienced strong momentum in large deal flow during F4Q17, with enterprise deals up 10% y/y and an enterprise deal size of $282,000 versus our estimate of $272,000 and $261,000 last quarter. This, in turn, drove upside to software license revenue of $85 million (versus the consensus of $80 million) and total billings of $196 million (12% y/ y) versus last-quarter billings of $168 million (4% y/y). Referencing recent inflection point reports, customers are implementing hybrid cloud solutions with public cloud typically as an archive tier, Commvault benefits as customers expand the amount of workloads/capacity under management. Management noted improved confidence in F1Q18 and F2018 consensus estimates and reiterated longer-term goals of 20% license growth and recapturing leverage to 20% operating margin with a soft target of F2020.

What The Bulls Liked

Software license growth in constant currency was 18% (versus 15% reported and 8% last quarter) against what bears considered the beginning of tougher comps through F2017. A brief discussion of F2020+ operating margin goals suggests incremental upside potential to F2018/F2019 consensus estimates if large deal execution continues.

What The Bears Liked

Bears will argue that a move to subscription pricing under 606 will inflate license revenue in F2018, yet only a small percentage of customers are under this model, so the impact is likely minimal. Dependency on large deal flow remains a systemic risk.

Source: Pacific Crest Securities. The full report can be found here.

If you are looking for confidence when protecting and managing your data, then choose COOLSPIRiT today, the European Partner of the year with Commvault to help advise on your strategy today.

Our Commvault Partnership video can be found here.

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