Good morning, ladies and gentlemen, and welcome to the CommVault's Fourth -- Fiscal Fourth Quarter and Fiscal 2013 Year-End Earnings Call. [Operator Instructions] At this time, for opening remarks and introductions, I would like to introduce your call and turn the call over to Mr. Michael Picariello, Director of Investor Relations. Please go ahead, sir.

Good morning. Thanks for dialing in today for our fiscal fourth 2013 and fiscal 2013 year-end earnings call. With me on the call are Bob Hammer, Chairman, President and Chief Executive Officer; Al Bunte, Chief Operating Officer; and Brian Carolan, Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made during this call, including in the question-and-answer session at the end of the call that relate to future results and projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Actual results may differ materially due to a number of risks and uncertainties, which are discussed in our SEC filings and in the cautionary statement contained in our press release and on our website. The company undertakes no responsibility to update the information in this conference call under any circumstance. Our earnings press release was issued over the wire services earlier today, and it also has been furnished to the SEC as an 8-K filing. The press release is also available on our Investor Relations website. On this conference call, we will provide non-GAAP financial results. The reconciliation between the non-GAAP and GAAP measures can be found in Table 4 accompanying the press release and posted on our website. This conference call is also being recorded for replay and is being webcast. An archive of today's webcast will be available on our website following the call. I will now turn the call over to our CEO and President, Mr. Bob Hammer.

Thank you, Michael. Good morning, everyone, and thanks for joining our fiscal fourth quarter and 2013 year-end earnings call. CommVault had an outstanding Q4, with strong performance in all aspects of our business and strong growth both domestically and internationally. For the year, we achieved record revenue, operating profit, EPS and cash flows, and I'm pleased that we met or beat our planned objectives for our fiscal year 2013, and, as expected, delivered solid double-digit revenue and earnings growth for the full fiscal year. We also exited FY '13 with good visibility going into fiscal 2014. Let me briefly summarize our Q4 and full year fiscal 2013 financial results. For the quarter, total revenues were $138.3 million, up 21% year-over-year and up 8% sequentially. Software revenue was $72.1 million and grew 23% year-over-year and 9% sequentially. Services revenue was $66.1 million and grew 20% year-over-year and 6% sequentially. From an earnings perspective for the quarter, operating income, or EBIT, was $31.8 million, up 50% year-over-year and 7% sequentially. EBIT margins were 23%. Diluted earnings per share were $0.41. For fiscal 2013, total revenues grew by 22%. Software revenue grew by 25%. EBIT grew 53%, and we expanded EBIT margins by 470 basis points. We generated approximately $42.9 million of cash flow from operations during the quarter and approximately $112.7 million for the year. We finished fiscal 2013 in a very strong financial position, with over $435 million of cash and short-term investments and no debt. During the quarter, we successfully launched Simpana 10, which has further strengthened our competitive position in our core data management business and is opening up new market and distribution opportunities. I will speak more about Simpana 10 later in the call. Let me spend a minute speaking about the macroeconomic environment. Current macroeconomic indicators point…

Thanks, Bob, and good morning, everyone. I will now cover some key financial highlights for both the fourth quarter and full fiscal year 2013. Total revenues for the quarter were $138.3 million, representing an increase of 21% over the prior year period and 8% sequentially. For the full fiscal year, total revenues were $495.9 million, representing an increase of 22% over fiscal 2012. Software revenue for the full fiscal year was $251.5 million, representing an increase of 25% over FY '12. Our FY '13 software revenue was primarily driven on the strength of enterprise deals, which we define as deals over $100,000 in software revenue in a given quarter. Enterprise deals were 57% of license revenue in FY '13, representing an increase of $37 million, or 35%, over the prior year. In addition, the number of enterprise transactions increased by 23% in fiscal year 2013. The average enterprise deal size was approximately $266,000 for the full fiscal year versus $241,000 in fiscal year 2012. For the quarter, we reported software revenue of $72.1 million, which was up by 23%, or $13.4 million, over the prior year period. Revenue from enterprise deals increased by 27% over the prior year period and 5% sequentially. The number of enterprise deals increased 10% year-over-year and 1% sequentially. Our average enterprise deal size was approximately $272,000 during the current quarter compared to $235,000 in the prior year period. During Q4, our growth was driven by a strong demand for virtualization, source-side deduplication and Snap-based modern data protection solutions. We continue to see a strong demand for our capacity-based licensing models, which has a direct correlation to the underlying volume of data under management. Capacity-based license sales represent 73% of our Q4 software revenue and 69% of our full year software revenue. We anticipate that capacity-based…

Thank you, Brian. I want to wrap up the call with a brief commentary about why we are succeeding, our strategic direction and the status of Simpana 10. So let's first review the major reasons why we have succeeded consistently, producing such strong financial results relative to others in our industry. One, there has been high market demand for big data software solutions to solve problems related to data growth, complexity and cost reduction. Secondly, we continue to technically outpace the competition with innovative high-value solutions and support. We have had outstanding sales force execution that increased enterprise sales by 35% year-over-year, and lastly, our relentless focus on providing the best-in-class value and services to our customers prevails. So where are we going? As I said on previous earnings calls, we are driving towards our $1 billion plan goals by: one, strengthening our technology and market position in our core data management market; increasing distribution leverage in the enterprise, MSPs and the SMB segment of the market; significantly expanding our total addressable market and establishing our position as a technology leader in the broader all-things-data market segments, including mobile and analytics; and lastly, establishing a leadership position for comprehensive services and support for both the data management and all-things-data market segments. We are building on our strength in expanding into closely linked high-growth data-related market opportunities. Our core data management business will provide the growth foundation as we build positions in other higher-growth data-related areas. We have the markets, the products and a very strong organizational foundation. The key to achieving our financial objectives is execution. To make sure this happens, we have established a series of key initiatives to raise execution to the next level across all company functions. Now let me spend a minute on Simpana 10. We…

Thanks, Bob. Operator, can we please open the call for questions?

[Operator Instructions] Our first question comes from Joel Fishbein from Lazard.

A couple of questions, Bob. Just on the -- if you could comment at all on megadeals or multi-petabyte deals that you're seeing or have seen over the past several months, and also maybe if you can give us a couple maybe a little bit of flavor around Simpana 10 and some of the customer features that are getting some of the early adopters most excited about. That would be very helpful.

So, I mean, what we've said is that our revenue earnings growth is highly dependent on these large deals, Joel. I said on the call that our visibility is good going in, which it is, going into the Q1. So the key is can we sustain and build enough of a funnel in these big deals for the balance of FY '14, given the weak macroeconomic environment, and I just raised the issue as a caution that we're concerned about it, and we just have a lot of focus on making sure that we can continue to build sufficient funnel to hit -- achieve our objectives for the balance of '14. So it has not become an issue. We're just -- we're certainly concerned about it, and we are very focused on it...

I'm sorry. Just in terms of Simpana 10, can you just talk about any of the early customer feedback? And I know you said it got off to a very strong start, but anything specific around 10 that customers are most interested in or drivers there?

So let me be clear. Any new customer is shipped Simpana 10, and we're starting the 25th of February. So all our new customers are getting Simpana 10. In regard to the feedback, what I mentioned was Simpana 10 dramatically strengthens our position in our core data management business. So it's not just the newer opportunities in mobile and analytics and compliance, but it's our core, and it ties, I think, to what I just said on the call. We dramatically scaled out our deduplication capabilities. So we basically have global parallel dedupe, which nobody else in the market has. It's the most cost-effective and high-performance dedupe capability in the industry, and it's intelligent, meaning, it's just not 1s and 0s, we index the object and make sure we -- that index is consistent with the version of the application throughout the data life cycle. So that's also a major advantage for us relative to things like dedupe appliances. Second, our ability to use Snap. Our Snap management and replication capability is really outstanding. Our ability to consolidate, to backup and archive into a single copy, which we call OnePass, is a major advantage for us. It's got major performance and cost advantages. So when we work with a customer, and they've got hardware from different hardware vendors and we can put a consistent management structure on top of that, build a universal virtual data repository across an enterprise, those are major advantages for our customers that translate into dramatic cost reductions in a much higher operational efficiency and reliability and a lot less support issues. So that's just in our core business. And clearly, customers looking forward -- one of the other issues that is resonating really well with pretty large customers is our ability to automate all processes,…

Our next question comes from Aaron Rakers from Stifel. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: A couple if I can as well. First, Bob, it's been a little more than 2 years since you've introduced your capacity-based licensing. Obviously, that's going extremely well. I'm interested if you have any kind of updated thoughts or comments around the recurring revenue nature, the annuity nature of that. What kind of renewal rates look like, what you've been seeing. I think, last quarter, you alluded to maybe sharing a little bit more on that front. I'd be interested in how you're thinking about through 2014.

Well, the renewal annuity of revenue coming off our capacity-based license sales has been very strong. We haven't publicly defined what that number is yet because we want a little bit more history, but it is at the higher end of our expectations in terms of what the annuity stream looks like. And if it continues at these rates and we can substantiate that it will continue, then I think we will provide some more color on it, but they're very good. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Okay, and then the follow-up question. I think, as we evolve and you get into some of these larger deals, one of the areas that we've heard you talk about investments into is kind of the professional services side. So I'm interested in how you're thinking about that as we progress through fiscal 2014, and maybe in that context, how we should think about that slowing through the margin line, particularly gross margin, on the Services segment, given that it would appear that you expect to see some kind of a mix shift within that services category over the next couple of years.

So number one, Aaron, our investment in services is strategic, meaning, we don't have goals of, say, services should be whatever the number is, $100 million with x operating margins in so many years. But the key is in whether it's MSPs or major enterprise accounts, without strategic services upfront, it is very difficult to make sure that you define and understand what a customer wants, make sure that a solution is properly architected, implemented and supported without comprehensive services. We've found that our partners and the good partners don't have the full complement of skills to do that. So we are building the skill sets and the processes and the capabilities so we can work with our partners to ensure that our customers are getting optimum value for the investments that they make, whether it's CommVault or CommVault and combined with these other partners. There is no other way to do this without having those capabilities, and we found and believe there's nobody in our market that does this really well. So we're making the investments to make sure that, that happens. Well, I'll let Al jump in because Al has been the orchestrator of all this, and he started working on these concepts and issues going back several years ago. And he and his team are making a lot of progress. So, Alan?

Yes, just a couple of extra comments there, Aaron, and thanks, Bob. One, we tend to be enterprise focused as we try to do this. The complex -- as the complexity goes up, obviously, you need the strong methodologies, the strong processes, the practices, the service products, if you will, and of course, the up-to-date trained talent on it. So those are kind of the key components of it all. I also think that, lastly, as Bob's point on not a lot of people do it well, do it in our case is our definition of market, which nobody else has. We link all these use cases together from better backup all the way through using the data in an analytics and search kind of context. So there aren't a lot of people out there familiar with not only these different use cases, but, particularly, as they're combined into best practice data management.

Yes, thanks, Al. And to answer your other question on margins, we believe we will still achieve our operating margin objectives, which we basically said would be somewhere in the mid-20s. At the point in time, we had $1 billion. In fact, I've said $1 billion and 25% operating margin. So it's still achievable. At the same time, we're making these very substantial investments in services.

Our next question comes from Eric Martinuzzi from Lake Street Capital.

Specifically, I want to dive into what you referred to as a spring swoon, Bob. You typically talk pretty cautiously. You never want to overpromise, but I was just wondering what -- did you do anything differently? You talked about a sharp focus on the sales funnel. Did you do anything differently entering the year than maybe in past years?

Yes, it is different. I mean, what we're seeing and hearing from competitors, there's enough data out there to say that we shouldn't do things. This is not business as usual, and that we should increase our focus on our funnel building and close rates and make sure that we have the added capability to make sure we hit our numbers. So the other thing we've done is even though we're investing heavily, we are making sure we make those investments in a way that doesn't overextend ourselves here, given the uncertainty without making sure we control it in a way that we can still hit our near- and long-term strategic objectives, but be a little bit extra cautious on how we manage our operating expenses. So the answer is yes, it is different than in prior quarters, and it may prove to be overly cautious, but we think it's the prudent thing to do both on the sell side and the managing of our operating expenses -- operating expense growth.

Okay. And then just vertically, anything you can tell us 1 month into the quarter versus the March quarter itself if the vertical outliers, both to the good or the weak, if those persist here as we enter the new year?

It's too early to tell.

Our next question comes from Aaron Schwartz from Jefferies. Aaron Schwartz - Jefferies & Company, Inc., Research Division: Bob, you spoke about most of the new customers coming on to Simpana 9 (sic) [10], but I was wondering if you could touch on the installed base. Have you seen upgrades from prior versions? And has that primarily been from version 8 or 9? And I'm just wondering from version 8, if they're not on the capacity-based license, what the trend line looks like there and is there an ASP uplift on the core data management component?

I think it's too early, Aaron. When we release a product, we release it in a controlled way for 1 quarter or 2, and we don't allow customer-led upgrades until we're absolutely sure everything is buttoned up. That's the same with 10. So we haven't opened up our customer-led upgrades yet. It should happen relatively in the near future, but this has worked extremely well for us. You very rarely hear a lot of noise about CommVault's releases, and one of them is we try to get them to be extremely high quality when we release them, and then we rapidly make any changes so that when we have automated customer-led, that those customers are not going to run with any issues. So it is a little bit early to answer those questions, but right now, we're feeling really good about it. Aaron Schwartz - Jefferies & Company, Inc., Research Division: Okay. And then second question, if I could. You talked a couple of calls now about the opportunity with your MSP partner base and the focus there. Can you just walk through how the structure of those contracts would look? Are those capacity-based deals as well and then are you sort of levered to the data growth of the customers of the MSP or can you just kind of walk through how those would work?

They are capacity based. They are -- we have a fair amount of subscription-based licensing coming out of that segment, and they're perpetual. So they're all 3, and, yes, the growth of business within those MSPs are clearly tied to the volume of data growth. So it provides -- if you add up the capacity base and subscription, which is the vast majority of our license revenue from that sector of the market, it provides a pretty good additional annuity for us as the MSP portion of our business grows.

Our next question comes from Michael Turits from Raymond James. Michael Turits - Raymond James & Associates, Inc., Research Division: A couple of questions, one about revenue, one about OpEx. First, on the revenue side, you commented you're comfortable what growth rates are for the full year. The Street was kind of seasonally down for the first -- fiscal first quarter just a couple of percent. Wondering if you were comfortable with that revenue -- seasonal revenue growth rate decline that the Street was modeling. And second, I just wanted to get into OpEx, if I could, and you had a 21% growth in headcount for this year. Does that suggest that you're going to start to accelerate the OpEx growth rate into next year so that's higher than '13 as well?

I'm going to let Brian answer that for you.

Yes. I mean, with that much headcount growth, we do expect our operating expense investments to most likely be at a higher rate. We're still comfortable, though, with top line growth and bottom line growth that's out there from a consensus basis. And from a Q4 to Q1 seasonality, we do typically see a decline in revenues and EBIT in EBIT dollars and margin. Michael Turits - Raymond James & Associates, Inc., Research Division: The Street says only a couple percent down, and given the tough environment, a couple of percent down sequentially in terms of revenue growth. I was wondering if you're comfortable with that.

Yes. At this point, Michael, we are comfortable with that. I think that's a reasonable number at this time in the quarter.

Our next question comes from Andrew Nowinski from Piper Jaffray.

Maybe just a few questions here. First, with regard to Arrow, do you think you're getting a share shift within Arrow that -- is that what drove the strong results there this quarter?

Well, I mean, I'll let Brian comment a little bit further, but we've had very, very strong results from Arrow in general and from some of the customers that sit under Arrow like CDW. Some of that has come from what Brian mentioned that going back about a year ago, we shifted all -- for all practical purposes, all of our SMB business from Dell to other channels, and Arrow has picked up all of that slack plus some. So they've executed really well for us. That partnership has clearly strengthened, and within the Arrow mix itself in terms of CommVault's business, I think you have to ask them. But clearly, they've been a really good distribution partner for us, and it's more than offset our SMB move out of Dell, beginning about a year ago so...

Actually, those comments and also from an enterprise perspective as well, we also see some pretty good performance out of Arrow.

Okay, then just my follow-up question. Regarding capital allocation, I guess, can you talk about your appetite for share repurchases and what you're thinking with regard to FY '14?

It is what it's always been. If we see a sharp correction in the market, we are prepared to go in and opportunistically acquire more shares.

Our next question comes from Brent Bracelin from Pacific Crest Securities.

One for Brian and one for Bob. Brian, starting with you. If you look at the average deal size, pretty healthy uptick in the quarter. It looks like 16% growth. What drove that in the quarter? Was it data volume growth based on your capacity customers? Was it just mix to large deals? Are you seeing higher uptake of add-ons? So help me just understand what drove the ASP increase this quarter.

Yes. So that's going to bounce from quarter-to-quarter for sure. I mean, as we do megadeals, and certainly, seven-figure-type deals and six-figure-type deals, large six-figure deals, it's going to bounce around. It's primarily driven, not necessarily by volume, it was more just average deal size. I wouldn't say there was any particular thing that was driving it other than just increased capacity sales and increased growth.

Okay, sounds like more of a mix -- large deal mix then. And then, Bob, obviously, a question for you here. EMC, making kind of big splash here around Software-Defined Storage, and unveiled kind of ViPR, this storage control. It's more of an orchestration tool. I guess my question is just what's your view on kind of this whole new Software-Defined Storage trend out there? I'd love to get your view around customer appetite for storage software. Is it changing? Are you looking at customers that have an increased interest in using software-based replication, software-based dedupe? Any view there would be helpful.

We believe in general that the move towards virtualization in the compute layer, which we've certainly seen already, virtualization in the network layer and virtualization in the storage layer will occur over time from a number of vendors, and, clearly, EMC will be one of the leaders in this move to virtualization. It will occur -- this is a situation that will occur over time, and there'll be many versions of it. I think we understand it really well and have a strong product road map, which will intersect with it. So that at the end of the day, CommVault will still be able to manage across all these different versions of compute network and storage, whether they'd be virtual or not, and I'm going to let Al open up here. But clearly, the scenario that we're well versed in, and we're way, way ahead of the game in terms of our product pipeline and our ability to deal with this. So, Alan?

Brent, just a couple, those are really good comments. So a couple of added points to your list of questions there. One, on replication, yes, that's something I am and the company's very interested in doing, particularly a software approach to it. We feel strongly about the merits of doing that, and that being said, we are working with our key partners, integrating their replication schemes as well. So that -- but that's going to be a key push. I think it's important in this environment. But as you know, we feel really strongly about the right way to manage data starts with understanding what the data is, and most replication environments out there are 1s and 0s movements and copies on that. And in terms of dedupe, I think you mentioned that in there somewhere, that table stakes anymore. Almost every software solution out there, in our opinion, must have it and it must scale well, and it must be done extremely well.

Yes, thanks, Al. So again, this is an evolution that will take many forms and take many years to evolve, and given leaders like EMC, these new technologies will begin to be adopted in the market, and we're well prepared to provide our customers for solutions across those new technologies as they become available.

[Operator Instructions] Our next question comes from Glenn Hanus from Needham. Glenn Hanus - Needham & Company, LLC, Research Division: All right, I'll make it quick. Can you comment on the federal? It's usually a healthy vertical for you, just given what's going on out there. Could you comment on how you did in the quarter and your outlook for FY '14?

Yes, I'd say we did okay, given the environment, Glenn, in federal. Outlook looks okay. Certainly, sequester has taken some of the edge off our numbers, but they still look good, but it is also an area of uncertainty. But I think we can manage our way through it, given our pipeline and opportunity, and again, that's an area where there's some very large deals. So, you might see some spikes here and there, Glenn, as they come in. And when and if some of those come in, we'll comment on them in terms of whether they're a spike or a trend.

Our next question comes from Robert Breza from RBC Capital Markets.

Bob, I was wondering, you talked a lot about the customer funnel and building that funnel. As you look at FY '14, can you kind of comment on how much bigger that funnel is compared to the start of FY '13? Is it up, order of magnitude, or just any kind of color on how big that funnel is.

I won't comment on that. All I'll say is that given in an uncertain environment, your funnels have to be larger than in a normal environment, otherwise your risk go up in achieving your numbers. And so we need to have significantly higher funnel growth than our anticipated revenue growth targets to make sure we're comfortable. So that's where the focus is. In other words, we need to raise the bar given the uncertainty out there.

Our next question comes from Ryan Bergan from Craig-Hallum.

I just wanted to address the Dell relationship. Year-over-year, there was flat growth. I'm just wondering if that was a product of -- it sounds like you were actively moving SMB deals away from Dell and to other channels. I'm just wondering, can you talk about the flat growth there at Dell and kind of what your enterprise customers are saying about Dell's move into pushing more of their own IP.

So, Ryan, we do not operate on hope. We operate on plans that we can execute, and there's a lot of uncertainty at Dell. So we move -- clearly, we move revenue from the SMB segment from Dell to others. Given the uncertainty that's sitting at Dell, it would be prudent for us to do the same thing in the enterprise, and that's what we're doing. That's what Brian mentioned. So we're taking very clear, direct action over time to move more of our enterprise revenue that's currently at Dell into other distribution partners because of the uncertainty. I mean, we can't -- you can't work with a partner when there's that much uncertainty sitting out there. So we're doing that and we'll continue to work with the Dell field, where it's -- there's mutual advantages, but strategically, we're clearly placing our bets on -- longer term on other partners who are, again, very, very focused on the enterprise, and Dell clearly isn't. I mean, their strategy is -- it fits what they're trying to do as a company, and we hope they act in our own best interest here.

Our next question comes from Srini Nandury from Summit Research.

As you look at your sales and marketing investments throughout the world, how do you prioritize where to invest because Asia is growing much faster than U.S. and Europe?

Good question. We -- so there's a couple of areas that we have added structure. One was MSP. So there's a focused new structure within CommVault now that's focused on the MSP market, and we've just added a lot of investment in Asia, Srini. We just brought in somebody new to run Asia as our VP. So the VP of Asia, by the way, moved in to take in the MSP role. He has a good track record there and he's taking a broader MSP role. And then, Rick Tyler [ph] who was -- ran our central region in the U.S., just moved over to take our Asian region, which has now expanded. We included -- so now China and India come under our APAC umbrella. We've been adding resources in there. Some of our -- we've had some people move from the U.S. and from our EMEA operations into our APAC operation. We've made substantial new expanded investments and new leaders in Japan. So it is a major area of focus for us, and we are making the appropriate investments to make sure we're going to be successful, both in the short and long term, in Asia.

Our next question comes from Phil Winslow from Credit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: Most of my questions have been asked, but just want to focus in on the competitive landscape a little bit. Just curious if you saw any sort of changes this quarter or the past couple of quarters with kind of your typical competitors?

We haven't seen -- from IBM or EMC, I don't think we've seen any change. I think in Symantec's case, I think they're a more focused company. Technically, we haven't seen a lot of change there, but I think from a management, they seem to have their act together better. From a market standpoint, we still see from Symantec, in particular, extremely aggressive pricing as they try to protect their installed base. I'd say those are the major changes out there, Phil.

Our next question comes from Michael Turits from Raymond James. Michael Turits - Raymond James & Associates, Inc., Research Division: Just a little bit more on OpEx. As you look into the first quarter, historically, sometimes, you've been up on a dollar basis in OpEx, 4Q to 1Q. Sometimes, you've been down. Given the sort of countervailing needs to both invest for opportunities and the environment, should we think of this as dollar up in terms of OpEx going into next quarter?

Yes, it -- we could see it -- depending on where our revenue is and commissions, it could go either way. Michael Turits - Raymond James & Associates, Inc., Research Division: Well, that helps. Great.

It can be flat or up or it could be flat and down. So if we overachieve on revenue, it'll go up and if we don't, it'll go down. How's that? Michael Turits - Raymond James & Associates, Inc., Research Division: That's a little better.

Michael, you want to bet that it goes up. That's what we want, but we can't guarantee that yet.

Thank you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Thank you.

Thank you.