Good morning, and welcome to our earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's 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 materially different from 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 website. Thank you again for joining us.

Now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay?

Good morning, and thank you for joining us. In Q1, we delivered results ahead of expectations on both the top and bottom line.

A few highlights include: subscription ARR grew 22% to $1.05 billion; our SaaS business fueled this growth, growing 38% to $424 million in ARR; subscription revenue increased 16% to $267 million, led by our SaaS business, which hit a milestone of $100 million of quarterly revenue; and we increased EBIT margins over 200 basis points to approximately 23%. Let me step back from the numbers and discuss the one thing driving our continued growth.

In one word, it's data. Even before the rise of AI, data was the lifeblood of every organization.

From systems of record like ERP and CRM systems to file and collaboration applications, organizations run on data. Today, AI creates and leverages more data and puts more data at risk.

That's why managing and protecting it is more critical than ever. This is exactly what we do, and why AI is a tailwind for us.

Commvault is positioned to be the foundational platform for AI resilience, protecting the data, workloads, and applications our customers run their business on. AI is changing how organizations think about resilience.

As AI creates more data, more identities, and more automated access to that data, having a backup copy is no longer sufficient. Customers are asking whether they can trust the data, govern which agents and humans have access, and how quickly they can recover cleanly when something goes wrong.

Commvault sits right there at the data layer. If the data is compromised, the business is compromised.

If the business can't recover that data to a clean, trusted state, the AI system can't be trusted either. We provide the fixed controls that enable customers to adopt AI securely and responsibly with clean, trusted, and increasingly automated recovery.

As AI deployments accelerate in the enterprise, we continue to innovate to help organizations navigate this shift. In Q1, we announced new capabilities to help businesses confidently adopt AI while maintaining control over their data, agents, and resiliency.

We believe these offerings will help organizations activate data safely for AI while extending discovery, governance, control, and resilience across hybrid environments. We'll share more later when they become generally available.

Our Commvault Cloud platform is a differentiator in how we win in an AI-first world. Today, customers run hybrid environments that leverage decades of infrastructure, on-prem and in the cloud, including SaaS applications, legacy systems, and now AI workloads.

Upstart competitors were built for a single use case or technology cycle. Commvault has 30 years of innovation experience and offers a breadth of coverage that is unique in our industry.

This breath is evidenced by Clumio, which is one of our strongest year-over-year growth drivers in our SaaS portfolio. Purpose-built for the cloud-native environments, Clumio helps teams recover large-scale datasets quickly and cost-effectively without the burden of deploying or managing additional infrastructure.

We believe this momentum will continue as companies strengthen their resilience strategies and protect AI data and large cloud workloads. While most enterprises are well into their cloud journeys, enterprise AI adoption is still in its early, experimental stage.

Organizations are testing carefully, and they want assurance that they can innovate without putting their data at risk. Commvault delivers that on one platform: protecting data, governing access, identifying risk, and most importantly, recovering quickly when something goes wrong.

Now let's discuss a recent customer win from the quarter that illustrates our differentiation, our ability to deliver resilience across some of the largest and most complex data estates. In Q1, we landed a pre-IPO company that was struggling to understand and control their data across multiple cloud environments, including Snowflake, S3, and Cloud.

The customer required visibility and answers to simple but critical questions: Who has access to the data? Can that access be revoked automatically?

Do they have the audit trails that satisfy regulators and investors alike? In partnership with AWS, Commvault delivered a modern data security foundation with full access governance.

Customer examples such as this underscore that for an enterprise to be truly resilient, it must move beyond traditional backup, embracing comprehensive tools like proactive threat detection, application rebuild, and verification tools that measure data integrity and trustworthiness. Our platform delivers this functionality, and we're seeing traction with these newer offerings, especially identity resilience, which continues to be a key on-ramp to the Commvault Cloud platform.

Here's why. Identity compromise is often the primary target in a cyber attack because it's the gateway to an organization's IT environment.

AI exponentially increases the number of non-human identities and agents that can be used to maliciously attack, and it compresses the time it takes to exploit vulnerabilities, putting the enterprise at risk. We enable our customers to confidently roll back to a trusted clean state to rapidly restore their business operations.

This is becoming a board-level priority. To that point, we recently landed a global oil and gas customer after it experienced a cyber attack that exposed their fragmented data protection strategy.

Their Active Directory instance was compromised, making business restoration slow and challenging. By eliminating legacy vendors and consolidating onto the Commvault Cloud platform, this customer remediated its resilience gaps and embraced a suite of capabilities, including BBM protection, Commvault Air Gap, and identity resilience, to automate identity protection and recovery.

These are not isolated product sales. They're reflective of the strength of the broader platform and what we believe will drive the subscription growth that supports our long-term financial model.

This momentum underscores why our ecosystem is more important than ever. The easier it is for customers to discover and use Commvault natively within the cloud where their data already resides, the faster platform adoption accelerates.

That is why, in Q1, we expanded our ecosystem through our strategic partnership with Microsoft. Commvault cyber resilience capabilities will be available as a native ISV service on Microsoft Azure, making it easier for customers to integrate resilience directly into their Azure workflows.

This helps organizations move faster while maintaining the data security, trust, and resiliency they need. In closing, let me leave you with some key takeaways.

First, AI is expanding the surface area for data disruption and cyber attacks. Resilience is increasing in importance, and Commvault sits at the center of that shift.

As data and agents grow, does Commvault. Second, our platform strategy is delivering results: added new customers, expanded multi-product adoption, and continue to drive strong SaaS growth, reinforcing our position as a leader in cyber resilience.

Third, we're scaling this business in a disciplined way. This quarter, strong ARR growth, record profitability, and growing free cash flow came together, demonstrating that Commvault is converting cyber resilience leadership into a highly profitable, cash-generative business.

Finally, our business didn't miss a beat as we successfully transitioned some key management roles, including Jeff Hayden as our President of Customer and Field Operations, and Gary Merrill back as our CFO. Now, I'll turn things over to Gary to walk through the financial results and our outlook.

Thank you, Sanjay, and good morning, everyone. We delivered a strong start to fiscal year '27, exceeding our guidance across all fiscal Q1 metrics.

Our performance was driven by our three foundational pillars: new customer additions, upsell and cross-sell of our Commvault Cloud platform, and new product momentum. This is our first time reporting under the simplified framework we introduced last quarter, which more accurately reflects the momentum of our subscription business.

Let's jump into our fiscal Q1 results in more detail. I'll start with subscription ARR and free cash flows, which are our North Star metrics.

We encourage you to evaluate these metrics on an annual basis, which aligns to how we plan and manage our business. In Q1, subscription ARR increased 22% to $1.05 billion.

We added $39 million in net new subscription ARR, driven by continued strength in our SaaS offerings. SaaS ARR grew 38% to $424 million, reflecting both new customer growth and healthy expansion from existing customers during the quarter.

We surpassed 10,000 active SaaS customers, an important milestone for Commvault. Our Q1 subscription net dollar retention was 114%, consistent with last quarter.

As a reminder, subscription net dollar retention includes both our term software and SaaS contracts measured on an annualized basis using the trailing four-quarter average. Our subscription ARR growth continues to be supported by a strong uptake of our software and SaaS identity resilience and data security offerings, which represented more than 1/3 of net new subscription ARR.

In addition, we are delivering strong growth in some of our emerging SaaS offerings, including Clumio S3 protection, Google Workspace, and Azure DevOps. In Q1, 49% of Commvault-managed SaaS customers were using two or more products, versus 42% 1 year ago.

Now, moving to free cash flows. Q1 free cash flow was $51 million, growing 71% year-over-year, reflecting strong collections on prior quarter sales and continued cash discipline across the business.

Our strong Q1 free cash flow puts us on pace against our full-year expectations. Now, I'll discuss our income statement performance.

Q1 subscription revenue grew 16% to $267 million, fueled by SaaS revenue, up 39% year-over-year. Subscription revenue accelerated to 85% of total revenue, compared to 81% in the prior year.

For the first time, SaaS revenue surpassed the $100 million quarterly revenue mark. Our other revenue lines performed in line with our expectations, resulting in total revenue growth of 11% to $314 million.

Turning to profitability. Q1 gross margin reached 82.1%, which includes SaaS margins of 70.6%, an increase of 635 basis points year-over-year.

Crossing the 70% SaaS margin threshold is another major milestone for us and demonstrates the scale of our business as well as ongoing product optimization, successful acquisition integration, and strategic agreements with our hyperscaler partners. We expect our SaaS gross margins to continue around these fiscal Q1 levels.

Q1 operating expenses increased 7% to $185 million, representing 59% of total revenue, an improvement of 200 basis points year-over-year. Our headcount was roughly flat year-over-year, which facilitates margin expansion opportunity while also allowing for reinvestment in strategic go-to-market and product initiatives.

Non-GAAP EBIT grew to $71 million, representing a non-GAAP EBIT margin of 22.8%, a 210 basis point improvement year-over-year. This was our best quarterly EBIT margin performance in over a decade and demonstrates our ability to drive margin expansion while continuing to grow subscription ARR.

Moving to share repurchase activity. During the quarter, we repurchased approximately 98,000 shares for total consideration of $10 million.

We view this as an initial step toward our fiscal year '27 capital allocation objectives, and expect repurchase activity to increase over the coming quarters. Our goal remains to return at least 60% of annual free cash flow to shareholders through share repurchases while maintaining balance sheet flexibility.

Now, turning to guidance. We continue to manage the business against our subscription ARR, subscription revenue, EBIT, and free cash flow objectives.

While quarterly performance can be influenced by deal mix, renewal timing, contract duration, and seasonal patterns across our global markets, our focus remains on delivering against these full-year commitments. We believe this provides the clearest view of the underlying trajectory of the business.

For fiscal Q2, we expect subscription revenue of $264 to $268 million, representing year-over-year growth of 20% at the midpoint. This would result in $310 million of total revenue.

We expect EBIT margins of approximately 20% and a diluted share count of approximately 42 million shares. For the full fiscal year 2027, we reiterate our guidance of subscription ARR in the range of $1.20 billion to $1.21 billion, representing growth of approximately 19% at the midpoint.

Subscription ARR growth will continue to be led by our SaaS offerings, which we expect to exceed $500 million of ARR by the end of fiscal 2027. We are increasing our subscription revenue guidance to a range of $1.119 billion to $1.129 billion, representing approximately 16% year-over-year growth at the midpoint.

We continue to expect total revenue of $1.30 billion to $1.31 billion. In addition, for fiscal 2027, we are increasing our full-year non-GAAP EBIT margin guidance by 50 basis points to approximately 21%.

We continue to expect full-year free cash flows of $250 to $260 million, weighted towards the second half of the fiscal year, with a diluted share count of approximately 42 million shares. In closing, cyber resilience remains a strategic priority for organizations navigating an increasingly AI-driven world.

We continue to see meaningful opportunities to both win new customers and expand our existing relationships to drive sustainable growth, margin expansion, strong free cash flow generation, and long-term shareholder value. With that, I'll open the call for questions.

Operator?

Thanks for taking the question and congrats on the results. I guess I want to start maybe just with the demand environment that you're seeing, especially following IBM's commentary that they saw a dramatic kind of reprioritization of capital expenditure plans across enterprise budgets exiting this June quarter.

Sanjay, I'd love to hear kind of, as you think about the linearity through the quarter, how do you characterize the demand environment right now?

Overall, our demand stays strong. The results reflect a pipeline that we've been building over the course of many quarters and as we look forward and we look into Q2 and beyond, Aaron, demand looks strong.

Now, we are seeing that a lot more conversation around AI data workloads, which I think bodes well for us. I think the IBM commentary was also around data security and AI resilience prioritization.

We do see that. It's early days on how enterprises are deploying mission-critical AI systems.

There's no question about the fact that data is going to grow. As data grows, it bodes well for us.

Yeah. Then as a quick follow-up, just on the Microsoft announcement through this last quarter, maybe just walk us through kind of what's changed, the highlights of what seems to be a continually deepening relationship with Microsoft?

That'd be helpful. Thank you.

Sure. Absolutely.

As a company, we've had a relationship with Microsoft for over 25 years. It's always been a very solid and important relationship.

Periodically we go back to the drawing board and reset what the priorities are for them, for us, and how we work better together. This agreement really does, I'd say, three things.

One is having better and deeper engineering connections. We've always had that.

This continues to say we're building a lot of AI and AI resilience and how the platforms work better together. The second is meeting customers where they are.

For that, it's being a native service inside of Azure, being more integrated into the marketplace, and things like that. It's easier for the customer to just be able to click and use AI-level resilience inside of the Microsoft cloud offerings.

The third is just, from time to time, deepening executive relationships and alignment. If I had to net it out, those are the three big areas within the announcement.

Yep. Thank you.

Great. Thanks for taking my questions, guys.

First one, Gary, the dollar strengthened a bit versus last quarter. Was that any meaningful headwind to ARR on a quarter-over-quarter basis and within your revised FY '27 ARR guide being just reiterated?

Hey, Rudy, good to talk to you this morning. Just framing overall, we are staying consistent with the simplified framework that we talked about last quarter, guiding ARR on an annual basis.

Specifically related to your question on FX, yes, there was a small to modest impact related to FX as it relates to net new ARR. If we were to use the beginning of quarter rates, subscription net new ARR would have been in the low 40s as it relates to millions, a few million dollar headwind to subscription ARR.

Got it. Super helpful.

Then I want to ask, just with memory prices, supply chain issues, just what's the update there last 90 days? I think a lot of us on this call probably continue to hear a lot of chaos in the channel in terms of customers and their inability to get hardware.

What are you guys seeing there? Did that worsen at all versus last quarter?

How are you positioned to handle that going forward?

Rudy, it's Gary again. I'll handle this one.

I would say the hardware constraints that are broadly in the market played out as anticipated and as expected. Hardware availability, it does impact some of our deals, obviously, as our software in the on-premise market is tied to hardware.

However, we manage that as part of our overall pipeline. We're managing the puts and takes on the pipeline and navigating the specific issues that come up related to hardware availability only.

It's a timing. That's why the platform approach that we have, and you can see the strength in our SaaS business, we have that flexibility, and we continue to see that acceleration on the SaaS side of the business.

When you balance it out, we're pleased overall with the performance. Even the contribution from term software net new ARR was sequentially flatlined.

You can kind of see that we're at a steady state, and as we manage that availability, we have opportunity to build from where we're at now.

One of the things that our architecture actually lends itself to is, without getting super technical, it's a decoupled architecture. We can sweat existing assets for customers a little longer should they need it, should there be a delay.

We work with them and with our hardware partners and offer them up SaaS, as Gary said. All in all, we've got a multi-pronged attack sort of to address the supply chain issues.

Great. Thanks, guys.

Appreciate it.

Hey, thanks. Good morning, guys.

I also want to ask about the impact of hardware prices on buying behavior. In the case of data protection sold as term subscription, we've been hearing that some customers might make room for new storage devices by buying shorter term deals, but we just don't know how widespread that is.

Then meanwhile, you just mentioned there are other customers that might sweat assets. Commvault lends itself to that, Sanjay.

In those cases, maybe it doesn't impact term duration, but then you can only sweat those assets for so long. Then there's obviously a third piece, too, you've a large cloud business and, at least in theory, higher hardware prices should benefit cloud sales, too.

I guess the question for you guys is are you seeing all of those things happen? I imagine probably so.

Is there a predominant pattern that we should consider and so when we model ARR and revenue for the rest of the year, is there a predominant pattern?

Howard, it's Gary. I'll jump in on a few of them.

You had a couple different questions from different angles, I'll hit maybe some of the more specific items directly impacting our business. Term, you hit term in the initial part.

Term is a consideration in our software business, obviously, for the reasons that you identified as they think about what their data state looks as they look out two to two three years, okay? In the quarter, we did see some modest headwinds on term.

Now, we're able to overcome that with strong performance and strong close rates where we outperformed our subscription revenue side, but we did see mid single digits sequentially impact on term length. That is specifically attributable to the hybrid environment that our customers operating in.

From a margin perspective, if you kind of look at our results, we're operating very effectively on a margin basis. Particularly if you look at our gross margins, right, very strong gross margins, 10-year high on EBIT margins.

That kind of lends itself to the momentum we see on the SaaS or the cloud side of the business, where customers can also prioritize their cloud projects tied to kind of our SaaS and cloud offerings, where we have less significant impact on pricing and infrastructure and actually where we're actually getting scale in the business.

That's great. Just as a follow-up for Sanjay.

You described Commvault's agentic resilience strategy in your prepared remarks. Can you elaborate on specifically which products are targeted at helping enterprises?

I guess I think of it as three things, but I'm probably missing some, but it's tracking the data that agents access, detecting which data is compromised, and then, importantly, rolling back or recovering to more secure states.

The product that I mentioned were the Agentic Library that allows customers to be able to use core capabilities around the product fully agentically. We call that AI Studio.

Then we have Data Activate, which sort of enables organizations to classify, curate data from protected backup copies, and then prepare that for data feeds into their learning systems or AI training systems. The third is AI Protect, which will help organizations understand the full impact, the provenance of any agent-driven changes, recover the affected applications, and then proceed over time to do a full-stack recovery across these AI environments.

All of these are well on their way and expected over the course of the next few months.

Thanks so much.

Thank you.

Hi. Thanks for taking my question.

I wanted to kind of get a better understanding of your ARR guidance philosophy. Look, the underlying dynamics seem very strong, big pipeline in identity resilience.

I want to understand how much of your guidance is conservatism versus incorporating some of the real-time factors with the hardware pricing such as move to SaaS workloads, push out of deals, or even discounting of software to kind of get deals through. Help me understand what's the push and pull in your thought process with the ARR guide.

Thank you. I had a follow-up after that.

Okay. Sure, Param.

I'll hit that, and then you come back with your follow-up, and nice to talk to you this morning. At a macro level, the strategic framework on guiding subscription net new ARR is an annual basis.

We're off to a good start. Actually, we're right on pace at the end of Q1 where we expected to land, okay?

The guidance assumes all the current conditions that we see. The situations where there's hardware availability and we're managing that on individual deals relative to our pipeline coverage, the current trends we see are baked into the guidance.

We do not have a acceleration or rotation from on-premise to cloud incremental than we see today. The key pieces to subscription net new ARR often happen at time of renewal for cross-sell.

With our rich platform, the cross-sell opportunity that we have drives a very significant expanded approach at time of renewal at the same time. Our renewal pools are generally bigger in the second half.

I think consistent with what we said, we will see probably a modest step-up in fiscal Q2, and then the majority of our net new ARR will happen in the second half, tied to the seasonality of our business.

Understood. Thank you so much for that, Gary.

As my follow-up, want to understand how are you thinking about the share gain opportunity from Veritas NetBackup? My understanding is there's a significant amount of renewals that's going to come in the next 12 to 24 months, so that could be a large opportunity.

I want to understand if there's a way to quantify that. What do you see as something that could be an easy transition towards the Commvault platform?

Hey, Param, it's Sanjay. That opportunity is something we track closely and is something that we continue to be consistently taking share in that space.

I'm not going to be able to give you a number associated with it, but it's definitely something that we've been working on, and continue to focus on. What's important to understand is as much as old-school backup is sticky, the world has evolved to resilience in a whole different way, and it's recovery plus plus.

There's a lot more that needs to happen to protect yourself, get it ready for AI, move the workloads where they need to, and our platform delivers that. It's a value-based conversation.

Understood. Thank you so much, Sanjay.

Hey, guys. Some management transitions that you guys have talked about before, but we're one quarter into your year.

Any sort of fine-tuning with the go-to-market approach at this point? I guess how are you guys looking to balance going after growth opportunities versus margin expansion here?

Sanjay here. How are you, James?

Let me see. It's Q1.

Q1 is traditionally where you reset things, you revisit things, and we did it. We were very thoughtful in being able to bring the leadership change all up in early Q1.

A lot of the work had been done prior. I'd say that the big focus for us is we're getting way closer with our largest accounts globally, our strategic relationships.

We continue to make sure that our SaaS offerings are well presented with the specialist team. It's a little bit of fine-tuning, but it's really where it's stuff that Gary was doing as CRO, where Jeff is now putting his own fingerprints on it.

At the core, the teams are very stable, and our focus is on the segments where we felt we had opportunity, mainly in our SaaS business as well as in our strategic relationships. Gary can give a little more color on that.

James, good to talk to you this morning. A few pieces where I would add more on the financial side is that what you're seeing and what our shareholders can see now is the scale opportunity that's in our model, okay?

What I mean by that is if you take a step back and look at our opportunity to accelerate growth, we have that opportunity, but we have that opportunity to do that while we're still giving opportunity for margin expansion. The improvements we've made on our gross margins just in the past year, with our gross margins up over 600 basis points a year, which derives the scale and efficiencies of a platform.

Those scale and efficiencies free up investment opportunity. What you'll see in our guidance, it's why we're raising our EBIT guidance for the full year by 50 basis points.

We will continue to invest, okay? There is investment areas to take advantage of this opportunity.

Those investments will continue to be in sales and marketing and our R&D as the focus area of our products. We're comfortable that we can make those investments while still scaling the business and driving free cash flow growth.

Makes sense. Maybe circling back to what Rudy asked around managing the indirect hardware element, I don't know if there's a way to think about how much, I'll call it net push you're seeing potentially or customers even looking to cloud alternatively in pricing.

Gary, just to put a fine-tune on it, what was SaaS net retention rate this quarter only?

James, I'll hit it. As as we worked through the framework last quarter, simplifying everything around subscription NRR, okay?

Now, 114% reported subscription NRR, that's flat sequentially and and flat year year-over-year. In order for that trend to remain at roughly 114%, that means that both the term side and the SaaS side have to be moving in the certain directions.

To give you a little color for this quarter as we transition into this model, in the definition way we reported, that would still keep SaaS NRR above 120%, okay? Give you a trend through this transition.

As I look out, I think a framework to think about subscription NRR going forward is probably plus or minus 200 basis points on either side. That's kind of where I can see it it it staying for the remainder of the fiscal year.

We'll come back to Todd. We go to the next question, please, John?

All right, thank you. Following up on previous questions regarding supply chain, is this changing the competitive dynamics out there as obviously some vendors are seeing greater impact versus others, including you guys?

I do believe your architecture provides a very flexible options versus some of the other ones. Does that provide, obviously, some competitive advantage, but does that provide some tailwind to your new customer metric?

Is this something that you're aggressively going after? How does that new Azure partnership announcement potentially add to that new customer metric this year?

Thanks.

Good morning, it's Gary. I'll hit this.

There's a couple competitive aspects, I think let's let's frame, is one is the architecture that we articulate is absolutely a competitive advantage, okay? You can see the trends in our business with our growth of our of our SaaS business and the opportunities that we give our customers to prioritize cloud workloads and cloud migrations while also then working through the supply chain implications on on-premise, okay?

One of the unique offerings that we have is even our Clumio business. Think about our Clumio business, which really helps resonate with the cloud-native motion, and particularly large-scale datasets like S3 protection, where there's massive cloud workloads.

With now an offering out there in the market that really increasingly drives at these large data states that are more cloud-native companies, that is more AI-relevant workloads, right, there's massive opportunities at as there, okay? The Clumio business is one of our fastest-growing businesses year year-over-year.

The opportunities we have for our customers to drive that cloud growth while working through any availability challenges that they may have that we work with them on just gives the opportunity for us to continue to growing regardless of the market dynamics.

Great. Do you expect that to drive your new customer add metric, the new customer?

Absolutely. Our SaaS business is the driver of our new customer business, significantly, actually more than the on-premise business.

If you think about, we crossed over 10,000 SaaS customers this quarter, another major milestone. We hit some major milestones for our SaaS business: $100 million of quarterly revenue, 10,000 customer mark.

When it pivots back to the new customer lens, what we find that 40% of our SaaS customers are net new to Commvault. We're driving massive new logo adoption straight to our SaaS business, which is relevant to that product or the product implications of meeting customers of where they're at.

Great. Then are you seeing any changes in deal size or maybe even the deal velocity increasing as you continue to expand your product portfolio and obviously identity becoming a more important part of your overall solution?

No significant changes on ASP during the quarter. Where we do see strengths is you look at the identity and data security pieces of our business, tied to our more simplified type framework that we drive measuring towards subscription ARR, we saw about a third of our subscription ARR, net new ARR, specifically from our identity and data security offerings.

We continue to expect to see that throughout the remainder of the fiscal year.

Great. Thank you so much.

Hey, thanks Sanjay, Gary, for taking the questions. I guess one for Sanjay, one clarification for Gary.

Sanjay, can you just talk more at a macro level in cybersecurity and your business, just how conversations are changing in the past 3 to 4 months since Mythos and Glasswing come out? How has it impacted customer conversations?

Is it materializing in any way in terms of budgets or sales cycles or what's just the broader observation of behaviors seen with customers as they digest this?

It's a great question, and it's one that's top of mind to customers. I tell you that over the past few months, since the frontier models, we started looking at all the cyber impacts and the capabilities, we're having more conversations than ever.

The questions are around things like non-human identities, okay, and how do you control that? What's the blast radius?

How fast can you roll stuff back? Is it even possible?

The conversations are quite different than more traditional recovery conversations. I'll share an anecdotal experience, recently we hosted about 20 top CISOs as part of our partnership with TIME Magazine, and the questions were all about this, exactly this: non-human identity, blast radius, how fast can you find it?

It's early days in some of the more AI-enabled cyber attacks, but it's absolutely a reality that everyone's thinking about. Now, when data is also growing at the pace that it is with AI, there's more data in flight, there's more data in more locations, there's more velocity of data, all of that matters.

Having the provenance of what happened to what you can fix automatically becomes the question. That's sort of more of the tone and manner of what the conversations feel like, and it plays right to our platform.

Thanks, Sanjay. Then, Gary, for you, just to maybe clarify some of your comments from throughout the call today.

Looking at some of the subscription net new ARR and the seasonality there, last year, we saw an increase in Q1 subscription net new ARR over Q4. We don't necessarily have an apples-to-apples comparison from a couple years ago, but anything to clarify when it comes to seasonality in Q1?

Was there a net headwind to the business from some of the supply chain dynamics and the term deals that you saw in the quarter? Then just any color you can share in terms of how to think about the seasonality for 2Q subscription net new ARR?

Thanks.

Sure. Once again, this is Gary again.

I'll hit that. Year-over-year comparisons, positive or negative, can be tough there's individual specific circumstance.

I think the market around hardware availability today is significantly different than it was a year ago, right? Doing strict apples-to-apples comparisons can be off.

If you kind of look at the term software business, because you're specifically asking about that, the better metric is probably the sequential, where it was the term software if you look, it's flat quarter-on-quarter. It tells you that we're navigating any individual specific items related to hardware in that business.

If I think about framing the guidance, I'm sticking to my simplified framework of annual guidance on subscription ARR, we're anchored. We're confident in the guidance we gave at the beginning of the year.

It was roughly $190 million of net new subscription ARR. Nothing has changed.

I'd never expected to make any revisions to that. I think I even said that last quarter.

We likely would revisit that at the first half as it's an annual metric. Where we landed at Q1 puts us right on pace where we want to be.

If you want to think big-picture framing, I would expect a modest step-up in fiscal Q2, sequential improvement in Q2, and then the remainder, which will be weighted towards the second half, okay? The other contributing factor that can impact subscription net new ARR, which would be conversions, anything that's coming out of our perpetual business that moves into subscription net new ARR.

The trends in Q1 was lighter than historical trends. On average, we usually saw a contribution mid to high single digits in the millions of contribution from conversions.

Q1 was less than historical average. What it tells you is that in Q1, there was a couple headwinds related to FX and less than historical trends on conversions, which then gives us the confidence that the underlying organic piece of the business is strong, because the parts of the business that are operating very helpfully and strong are the pieces that are the long-term growth drivers of the company, particularly our SaaS business.

That will frame kind of how I see the big picture and bring it back to the quarterly and the moving parts. Very,

very helpful. Thank you, Gary.

Good morning. Can you guys hear me?

Yes.

Who is it?

I think Todd. I think Todd's back on.

Oh, Todd. Okay.

Good morning, Todd. We can hear you.

Good morning. Can you guys hear me?

Yeah.

Yes,

yes,

yes. Sorry about that.

Appreciate the question. Just would love to get an update on the adoption of Commvault Cloud Unity.

What are you seeing there in terms of customer uptake? When do you think that will kind of start to contribute to the cross-sell kind of expansion opportunities?

Hey, Todd, it's Gary. I'll hit that.

Think of Unity not as an individual product, but think about it as a customer experience, right? The ability for our customers to experience the platform and the benefit of managing their workloads, giving them the visibility of their workloads regardless if those workloads are on-premise and the cloud, bring it all together and action their protection strategy from a single source of truth, the console, okay?

That's the value to the customer. The value to Commvault is the ability for us to drive cross-sell momentum, because if the customer has the visibility of where they're protected and where they're not, we have the opportunity to help them to make sure that they're protecting their workloads no matter where they are, okay?

Benefits for us then becomes what happens with multi-product adoption and cross-sell. A little color I can give you on trends there.

If we look specifically at our SaaS business and look at the Commvault-managed customers, we're up to just shy of 50% of our customers on that platform are using more than one product. We're at 49% of those customers, which is a huge improvement year-over-year.

When I double click into that, where we're actually seeing the most growth, right, the highest level of growth, is the customers in the cohort that are 3 to 5 products. While our headline metric anchors around greater than two products, what gives us confidence in the ability to drive that cross-sell motion, especially when we get to the second half, is the strength we see in that 3 to 5 product cohort.

Great. Thank you.

Great. Hey, guys.

Thanks for taking the questions. I just want to follow up on the identity theme here for a second.

It's obviously become a critical dependency for virtually every enterprise app and workflow. As support for problems online, is the larger opportunity the direct monetization of identity resilience or the ability to establish Commvault as a more strategic platform within identity, security, cyber recovery initiatives?

Then I have a follow-up.

Hey, Michael, it's Sanjay. Great question.

Identity, as I said in my prepared remarks, that identity compromise, credential compromise is invariably the first entry point for the bad actors. Now, it only gets more complicated when that is multiplied in the tens of thousands, for example, with non-human identities.

Then being able to really understand which non-human identity, i.e., agent, what, where, and what implications, ripple effects it has, becomes the starting point in many cases for the provenance of the recovery and the rollback that has to happen. Then whether it's an application that need to be rebuilt, whether it's cloud-native application, or data that needs to be brought back in a trusted manner, it's the whole thing.

It's the daisy chain of it all working together. We've been saying that now for I'm saying close to 2 years, that identity, 2 years ago at our SHIFT event when we brought our identity resilience capabilities out, that this becomes paramount.

To follow up with the earlier anecdote I provided on the CISO conversation recently, I did ask the questions to, where does identity protection live? I got 100% sort of hand raises in the room that the CISO organizations were all on point for making sure that identity resilience was part of their charter.

You can see how quickly this has become such an important part of both the defense, but also the recovery elements of the resilience.

Got it. Super clear.

Thanks, Sanjay. Then, as my follow-up, you recently hired a new Chief Partner Officer with a significant cyber security experience.

As Commvault continues its evolution from the more traditional backup and recovery vendor towards a broader cyber resilience platform, where do you see the greatest opportunity to leverage partners to accelerate adoption and expand your reach within the larger enterprise cohort? Thanks.

We've always been clear that the partner ecosystem is pivotal as large enterprises start transforming their resilience thinking. Brian's background plays very well into how our customers and our partners, actually, let's start with the partner conversation, are thinking about it, because it's security and data security, identity resilience, and recovery can't have a lot of light between them.

To be truly resilient, those three elements need to come together. That's what we said when we brought out Unity, the platform, that these have to work closely together.

Partners don't want to work with 50 different tools to deliver that solution. Coming back to what I said about the provenance of the attack or what was compromised to what needs to be recovered, we're the platform that delivers that, be it on-premise, be it on cloud, be it any kind of hybrid.

Obviously, we're very keen on having him on the team because of the background, because he can talk security, he can talk to the partners that are on the front end of the framework, if you would.

go ahead. Thanks for taking my question.

Sanjay, you called Clumio one of the stronger growers in the SaaS portfolio. Big picture within Clumio, I think Gary briefly described cloud-native customers starting to drive that acceleration.

That customer example you gave around Snowflake, S3, GovCloud, sounds much broader than a conventional sort of deployment in your case. Just curious, was that a big driver for Clumio, that deal this quarter?

Just how do you view that and some of the deals as early examples of a more repeatable platform motion now, or still remains a more bespoke engagement? I had a quick follow-up.

Actually, this is Sanjay. It's not bespoke.

This is a very clear persona that Clumio is attractive to: the cloud-natives, companies that are 100% cloud, that have deep commitment to cloud platforms, cloud databases, cloud PaaS layers, and our ability to be able to roll those back at a cost point and a timeframe that is incredibly valuable to customers. We've got customers growing this footprint incredibly well because it goes deep and it goes fast.

The onboarding, provisioning of this technology and the ability for us to be able to recover when needed is second to none. When you combine that with our Rewind capability for cloud-native applications, there's nothing like it in the business.

Very helpful, Sanjay. Gary, just follow up on the net dollar retention.

Know you mentioned multi-product adoption, 49%, very strong progress, and it's rising faster, newer offerings. Just in light of that, you mentioned SaaS NRR has been around 120% and subscription's pretty stable at overall 114% over past several quarters.

Just curious what might be offsetting the stronger attach motion today in terms of that metric? Since you mentioned the confidence in the 3 to 5 product attach rates in the second half, just curious, how do you see the potential for that NRR to continue to trend up from this point onwards?

Hey, Shrenik, it's Gary. Staying true to the framework that I outlined last quarter, and moving towards subscription as the combined metric, whether it's across ARR, net dollar retention, and revenue, it's kind of the key P&L and related metric.

That 114% is the confidence mark that we have. Where I kind of see the goalpost, for lack of a better way to describe it, as I look out, is probably plus or minus 200 basis points on either side.

I see opportunity, obviously, if we continue to drive the multi-product expansion as the year goes, tied to the offerings that we've been talking about, that kind of gives you the framework. Now, I've not factored upside, right?

I've not factored upside of incremental improvements of NRR into the guidance. My guidance assumes the trends that we see will continue at the levels that we're currently experiencing.

Now, the dollars go up because the base, especially as we get to the second half, is much bigger, right? As we compound our motion over many years, okay, and it's seasonality business that's geared to the second half, it gives us that confidence of the trends we're seeing, early trends we're seeing, not only in the identity and data security that Sanjay outlined in pretty good detail, but the other offerings like we just talked about Clumio.

In my prepared remarks, there's some of our emerging offerings, whether it's Google Workspace, or whether it's DevOps workloads. We're starting to see the trends pick up across the portfolio.

Some of those individual products, ASPs individually are lower, but what it does is drive the ARPU related to the customer as we get that 3 to 5 cohort. That's the metric that we look at.

It's the combination of the vision that we've laid out probably last November of Unity and the opportunity we have in this platform to drive that cross-sell in some of the early signs of strength that we're seeing.

Great, very helpful. Thanks a lot, Sanjay, Gary.

Thanks. Good morning, guys.

Sanjay, it seems like a rising tide in your space, but we're hearing good things about all of your major competitors from our checks. Maybe just talk what really differentiates Commvault at this point and how your win rates are trending?

Hey, Jason. I think I touched on it earlier.

It's the platform. It's the ability for us to take complex hybrid workloads and simplify resilience around it.

That's the core of what we do. Gary talked about it as well, which is it doesn't matter where the workload originates or ends, we make sure that it's protected and we give full resilience to the enterprise that's working with us on one single platform.

Your data can live in the cloud, your data can start in the cloud, we have the ability to give you a single policy engine that protects you across the board. Now, alongside that, we've got capabilities like clean room, like Threat Scan, identity resilience, all of which make recovery that much more bulletproof.

The ability for us to be able to understand what happened, whether it be AI-enabled or not, our ability to take large data estates and applications and bring them back to life. We win based on our technical capability to take the most complex customer environments and give them resilience.

We have north of 1,600 approved patents, granted patents to the company, and we continue to innovate like never before.

Great. Then just any comment on win rates?

Hey

Jason, it's Gary. I'll hit that.

We don't specifically, obviously, disclose our win rates, but one area that I look at measuring is, as we come into the quarter, what's our pipeline look like and our ability to close against the available pipeline? That kind of shows that if our value prop is resonating, okay, if we're able to demonstrate the ability to close that pipeline during the quarter.

If I look at some of those metrics, we see improvements. We see improvement year-over-year.

That shows to the effectiveness of our ability to compete when we're driving those metrics higher.

Excellent. Thank you.

Great. Good morning, and thanks for squeezing me in.

With enterprise data growth running materially faster than backup spending and that most AI workloads remain unprotected today, how should we think about the timing of monetizing that gap between data growth and protected data growth? When can those AI workloads become a meaningful contributor to ARR growth?

Thank you.

Hey, Junaid, it's Gary. I'll jump in, okay?

We think about the movement of accelerated data growth, that everybody's somewhat aligned around, as Commvault being a second-level beneficiary to that trend. What I mean by that is as the news that we all hear is AI infrastructure and AI purchasing, as it relates to infrastructure, exploding, okay?

That data has to be put into models, trained, tested, put into production and enterprise applications. That will take time.

As it relates specifically, I think, to your question about how have we factored maybe some of that into our guidance on subscription net new ARR, accelerating revenue compared to levels that are today, related to AI data sets for AI initiatives into production enterprise application, is not factored into our guidance. We view that as more of a secular trend.

The secular trend aspect's the important piece, because it's not a once-and-done, big bang, we're going to get to see a tailwind this year. We view this as kind of look out in that 1- to 3-year framework that gives us sustained opportunity to drive subscription ARR growth more on a secular basis and less dependent on achieving our financial objectives for the current fiscal year.

Correct. Examples being earlier this month, we released support, deep support for for the newer AI tooling like Snowflake, Databricks, Pinecone, to so BigQuery.

All of this enables customers to start building and using data in in in applications in AI-enabled applications, and we've got, as always, we've got the support for the tooling that they're using. Over time, that's gets more and more sophisticated and our ability to protect that gets more quantifiable.

Great, thank you. Just to follow up on that multi-product adoption that was asked earlier.

What are you seeing from customers that's separating those customers that remain single product from those that are expanding to, let's say, two, three or more products? Is it just the size, any particular industries?

Just kind of curious what you're seeing out there. Thank you.

It's Gary. As it relates to how it impacts our model, it's the customers that are prioritizing recovery.

What I mean by that is our customers that believe recovery is the new wave of security. When you get to a platform approach and leverage our Unity vision, ultimately what we're doing for our customers is allowing them to bring their businesses back to life effectively and quickly.

If you have to do that using multiple products over multiple vendors over multiple versions, you will not be able to recover your business. Common theme is prioritization of recovery as part of their security posture.

That's what kind of drives our cross-sell motion.

If I had to oversimplify it, if you're using one product, it's a point solution that you're invoking. If you're using multiple products, it's resilience that you're invoking.

Great. Thank you so much.

Thank you.

Thanks, everyone, for joining today. We reached our hard stop.

Unfortunately, for those remaining in the queue, we'll prioritize you during the call backs coming up. We want to thank everyone for your continued support.

Thank you.