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Large Hybrid Deals Drive Business For Commvault

Written on: Mar 9, 2018 11:00:00 AM

Written by: Alex Raben



Recent earning results shows Commvault are delivering strong license growth.

Research on Commvault activities has shown a surge in enterprise hybrid cloud deals, by way of several seven-figure enterprise deals. Please read more in this brief article.


Commvault experienced strong Hybrid Cloud adoption within its enterprise business (63% of revenue), with ASPs surging to $375K from $282K last quarter, leading to $3M in license revenue upside and $19M billings upside. We continue to see opportunities for license growth upside of $10-15M in F2019 on our bull-case thesis ($80) if Commvault can continue to execute on deals above $300K.

What Happened

Similar to last quarter, Commvault closed on several seven-figure enterprise hybrid cloud deals that drove strong upside to revenue and bookings as we estimate approximately 3-5 deals in the $3M range to drive at least $10M in revenue in F1Q18. The Company noted that it is now adding approximately 10 petabytes per month of public cloud managed data, and we estimate the company will reach the 200 petabyte range by the end of the fiscal year. A higher DSO at 75 days, up from a recasted 70 days a year ago, may be leading to some overhang on the stock this morning, but overall, we see management's confidence in Street estimates for the year, as well as providing guidance for deferred revenue, as positive signs for visibility over the next three quarters.

What The Bulls Liked

Billings normalized for 606 were up 15% y/y to $179M as large enterprise customers are beginning to adopt the newly introduced subscription model (vs. traditional capacity model). Management's tone on F2018 has improved with updated views on meeting/exceeding Street estimates with 170 bps F18 operating margin improvement that we believe sets up the model well for F2019. Finally, Commvault is now seeing initial revenue from its Hyperconverged appliance that will be positioned against other vendors in the mid-market.

What The Bears Liked

The DSO growth and the dependence each quarter on large deal execution remains an ongoing risk factor and will likely increase quarterly volatility based on the timing of large projects. Bears will argue that contribution margin should have been higher in F1Q18 with license upside and opex effectively flat q/q from the seasonally high F4Q.

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

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