Ladies and gentlemen, thank you for standing by, and welcome to the Commvault Fourth Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce Head of Investor Relations, Mike Melnyk.

Good morning and welcome to our earnings conference call. I'm Mike Melnyk, Head of Investor Relations. And I'm joined by Sanjay Mirchandani, Commvault's CEO; and Brian Carolan, Commvault's CFO. An infographic with key financial operating metrics is posted on the Investor Relations Web site for reference. Statements made on today's call will include forward-looking statements about Commvault future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be different and those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commvault's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our Web site. Thank you again for joining us. Now I'll turn it over to Sanjay for his remarks. Sanjay?

Thank you, Mike. Good morning, and thank you for joining us today. Fiscal 2022 was "The best" year in Commvault's history. Our differentiated platform and portfolio are resonating with customers and partners alike. Demand is strong, and our team is executing, enabling us to outpace and take share from the competition. We closed the year on a high note, posting record quarterly revenue, EBIT, and EPS. Q4 software revenue of $101 million was a new milestone for the company, and we crossed $200 million in total revenue for the second consecutive quarter. Our growth was driven by the continued traction of our software and SaaS offerings, increased multi-product adoption, and through large deals. Additionally, Metallic continue to scale and contribute meaningfully to our revenue and customer growth. As we accelerate our recurring revenue journey, we are increasingly focused on ARR as a barometer of our future growth potential. Over 80% of our revenue is now recurring in nature, and growing. At March 31, subscription in SaaS ARR increased 46% year-on-year to $346 million, and now represents 59% of total ARR. And I'm pleased to report that I in just six quarters of commercial availability, Metallic has exceeded $50 million in ARR. Its growth is extraordinary, customers love it, and we love it. Brian will discuss the financial highlights in a moment, but let's first discuss the year ahead. Over the past three years, we've assembled a world-class leadership team with deep domain expertise in cloud and SaaS. We transformed the company through our simplification, innovation, and execution mantra. And today's data protection market, especially data management as a service is at a tipping point. This is an incredible tailwind for the company, and it is why we firmly believe our time is now. You see, it's rare to have three…

Thank you very much, Sanjay. I appreciate that. After more than 21 successful years with Commvault, I have decided that's the right time for me both professionally and personally to move on. Commvault is coming off another record year and is well positioned for success. And it gives me great pleasure to hand the CFO reins to Gary who has been my colleague and partner for the past 16 years. I have great confidence in his ability to lead the team. Now, let's talk about the FY'22 results, the best year in our company's history. We reported record results driven by the Power of AND with both software and SaaS contributing to our accelerating growth trajectory. And we closed the year on a high note. Q4 was a record quarter. We exceeded $200 million in total revenue for the second consecutive quarter with total revenue growth of 8% year-over-year to approximately $206 million. Software and products revenue increased 12% year-over-year to approximately $101 million. Q4 marked the first time in company history that we crossed the $100 million milestone in quarterly software revenue. Software only growth excluding appliance pass-through revenue was approximately 15% year-over-year. Fourth quarter subscription software revenue increased 45% year-over-year to approximately $77 million. Subscription license sales represented 77% of total software revenue, an increase from 71% last quarter and 59% a year ago. We are clearly benefiting from the tailwinds of our subscription transition and our growing recurring revenue model. Revenue from software transactions over $100,000 increased 19% year-over-year, and represented 73% of software revenue. The volume of these transactions grew 14% year-over-year. And the average deal size increased 4% to approximately $327,000. We closed numerous seven-figure deals in the quarter. Subscription and Metallic ARR grew 46% year-over-year to $346 million. And now represents 59% of total…

Thanks, Brian. To recap, fiscal year '22 was a record year for Commvault, and we intend to build on that momentum in fiscal year '23. Overall market demand is healthy, the power of and is resonating with customers and partners, and our team is executing. In fiscal year '23, we expect to accelerate our growth and lead the cloud data management wave. It is our year, it's our time. Now, we will open the call up for questions.

Thank you. [Operator Instructions] Our first question comes from the line of James Fish with Piper Sandler.

Hey, guys, thanks for the questions, and nice way to end the fiscal year here. Brian, just want to actually clarify something you just said. You're reaffirming the goal of 32 for the revenue growth and the EBITDA margins for fiscal '23, which with low-20s EBIT would imply you're talking about 9% to 10% revenue growth for the year?

James, this is Brian here, good morning. So, yes, I mean we've made great progress towards our targets that we laid out in January, 2021, and we're tracking at or above all the top line ones. Importantly, our ARR is tracking well above the goal that we laid out. At this point, we're not changing 32 as an objective. And our objective is to continue to make progress towards that throughout this fiscal year.

Got it. And, Brian, it was great to work with you, and appreciate all the help over the years. Last one for me, many infrastructure peers have been seeing pressure on supply chain. And, obviously, you guys have moved the model more towards software, but there's still some hardware element with HyperScale, for example. What are you guys seeing regarding any tightening of components for Commvault or indirect impacts from project delays given the supply chain, especially -- it doesn't seem like a whole lot, but noting your lead metrics, like billings, actually showed material upside announcements? Thanks, guys.

So, let me take it, yes. Well, the past couple of quarters, we've been keeping a real eye on not just our piece of the deal, but the hardware that supports our software. And so, for the past couple of quarters, we've been able to successfully de-risk it. But it is a real uncertainty in closure times because software needs the hardware or the storage below it. And if the customers don't have delivery timescales it can matter. So, we've been keeping a tight eye on it. After Q2, we've been -- our whole forecasting process has -- takes that into account. It's not a perfect science, but we're keeping a real eye on it. The flipside is if the workload lends itself to a SaaS-based delivery, we've got Metallic, and customers lean in on that.

Thank you. Your next question comes from the line of Aaron Rakers with Wells Fargo.

Hi, guys, thanks for taking my question. This is Michael on behalf of Aaron. Looks like -- it sounds like Metallic is doing really well, going very nicely, you guys are executing on that. I'm just curious, are you able to provide any additional metrics on maybe like the deal size growth you're seeing specifically within Metallic, and maybe an update on the customer growth in the quarter?

Well, customer growth was just shy of, I think, 500 new customers last quarter. We've also got a great consistent overlap of customers having more than -- having Metallic and software, over 50% of our customers have both. And over 60% of our new customer base was brought in by Metallic. So, we're seeing, if my numbers are right, I think they are, we're seeing a great traction on size of customers, there's small, medium, large, we're seeing velocity, and we're seeing the power of and in action. At some point, we'll share more details about the deal size and other metrics that you'd be interested in, but we think sharing the $50 million ARR milestone was kind of important.

Yes, appreciate that.

Thank you. And our next question comes from the line of Jason Ader with William Blair.

Yes, thank you. And first wanted to say, Brian, good luck; these calls are not going to be the same without you, and miss you. Second, just to be clear, Brian, you're not saying rule of 32 for FY'23, you're saying that you still have that as a target, but not necessarily for FY'23, just wanted to double-check that?

It's our objective at this point, Jason. I think it's too early to change anything. We're not changing that as an objective right now. I think it really comes down to we're seeing great success from Metallic. Obviously, the margins associated with the SaaS business are a little bit different. And we may see a balance that is more pronounced as a -- as we shipped more revenue growth than margin growth, but that's -- it's too early in time to change that.

Okay.

We'll update you another time during the year, at another investor event.

Okay, so it's not guidance -- it's still the objective, but it's not guidance? Is that a right way to think about it?

Correct, right.

Okay.

That's correct.

Okay. And then was there any FX impact in the quarter or the guide, just curious because of what's going on in EMEA in particular?

Yes, no, great question. So, our growth was somewhat dampened by foreign exchange, by 200 to 300 basis points with revenue. We're factoring in current FX rates, as we speak, for this guidance. And so, we're keeping an eye on it as well.

Got you. Okay, and then lastly, on the services line, I'm just trying to do some quick math. If we just sort of divide by four on the $50 million ARR, I know that's not exact, but it's sort of rough, let's just say, $10 million to $12 million kind of revenue for Metallic in Q4 [indiscernible]…

Yes, we'll -- yes, go ahead.

I'm sorry, go ahead.

No, please.

I was just going say, and -- when I subtract that from the services line, so what I'm left is support and professional services, which would be kind of in the low 90s, which basically is flat with like two years ago. So, is there anything going on in the support and professional services side, because software is still growing, why would support and professional services be kind of flat two years later? Or am I thinking about the numbers right?

I think you're close, without being completely exact on that. I know it's not easy to back into all that. But we're seeing an accelerating SaaS growth in terms of the recognized revenue, and that's going to carry over the course of time. So, $50 million as an ARR, I don't know if you can exactly divide it by four if you take that accelerated. And on the rest of the services, what we're doing is we've been at this for several years now that we're programmatically and strategically converting many of our professional customers to new subscription in SaaS offerings. And that's showing up in the form of just accelerating recurring revenue growth and ARR as well.

And I'll just add something on the PS piece, we keep that rightsized. And as we build more automation, as we invest more into our channel, as we do more cloud-enabled delivery, our professional services continues to play an important for this rightsizing.

So, if we're going to think about like a couple years from now, on the support and professional services, forgetting about Metallic or SaaS, is it right to think about that business sort of kind of flattish over the next couple of years because you're sort of subtracting some stuff and adding some stuff, just kind of trying to figure out how to model that without Metallic? Is that -- do you have any -- can you give us any help there?

I think you're, directionally, correct in that.

Okay, thank you, guys.

Thank you, Jason. Appreciate it.

Thank you. And your next question comes from the line of Eric Martinuzzi with Lake Street.

Yes. You had a small acquisition in the quarter, wondering what the contribution was revenue-wise.

Well, firstly, I think we close it early-Feb, if memory serves me right. And we've been in the throes of integrating it and making the products more part of the Commvault framework. So, that's on track as part of the -- yes, that was our primary focus. The revenue streams that they had, that the acquisition, the company we acquired had, continue. And it's -- I'd say it's not material.

Okay. And the -- as we look out here to FY'23, just curious to know kind of enterprise appetite for large IT transformational projects, maybe versus a year ago, can you give us kind of a 30,000-foot view of that?

Increasing. I would say if I have to use one word, I would say, it's increasing. If you see the number of deals we did in the past couple of quarters over $100,000 or over $1 million, we see those increasing. And we see them being more strategic. They -- I gave three examples in my prepared comments about how customers are leveraging the single unified platform for more complex ransomware protection, for cloud-based transformation, for broader digital transformation, data management. And all of that, we are seeing more and more of that, the conversation are more strategic. The conservations involve -- just about every conversation and deal involves cloud in some form. And our track record of moving exabytes of data rapidly for customers into cloud holds us in good stead.

Okay. And then lastly for me, your investment in human capital to support the plan for FY'23, specifically, interested percentage wise or numbers wise, how are we looking at the investment in sales and customer support?

We are not going to provide the level of specificity at this point in time. But, we are focused on attracting, retaining, and building talent.

And if you -- some of the numbers you'll see, Eric, it's that for us productivity across the board in the company has been a massive priority over the past three years. And that's how we've been able to fund a lot of what we have done. And continue to fund a lot of what we wanted to. We are driving productivity. We've got a good seasoned set of leadership that understands that. We're obviously driving multi-product adoption which requires a level of sophistication in the conversations we have with customers. All of that's driving productivity. All of that's helping us resource what we need to do. So, without getting into the details, productivity has been our internal calling card.

Understand. Thanks for taking my question.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. And you may now disconnect.