Commvault Systems, Inc. (NASDAQ:CVLT) Q3 2023 Earnings Call Transcript

Gary Merrill: Aaron, actually relative if you look at quarter-on-quarter from a Q3 even versus Q2, the sequential growth we saw Metallic accelerated in fiscal Q3, so that makes us really happy with the results that we’re seeing. Last quarter, we mentioned that our next milestone for Metallic on the ARR basis was that kind of $100 million ARR. We’re well on track to be able to hit that in the near term. The Metallic business continues to provide us an amazing new customer acquisition engine as well. Now the deal sizes are smaller, right. So they show up, it’s lower ASPs. Obviously, they are not recognized in period from a P&L perspective. But if you look at that combination of what’s happening sequentially in ARR, which was up, I think even 6% sequentially combined with our deferred revenue growth, which was 20% year-over-year, it shows you that we’re capturing great financial stability through that Metallic business, that would kind of drive that future predictability in our revenue stream, which makes us really excited about what’s to come as we kind of continue to build that business out?

Aaron Rakers: Thanks, Gary. Very helpful.

Operator: Thank you. One moment, please for our next question. Our next question coming from the line of Jim Fish with Piper Sandler. Your line is open.

James Fish: Hi, guys. Thanks for the questions. Maybe on the cost side, trying to understand the impact of the headcount reduction, as well as the OpEx savings you get from the sale of the headquarters there. Separately, is there a way to think about both? And then additionally, with this kind of headcount reduction that you talked about in the pre-announcement, how are you guys thinking about the impact to the top-line in fiscal ’24, what amount was kind of quota-carrying?

Gary Merrill: Yes. Jim, it’s Gary. Good to hear from you again. A couple of things I’ll hit, especially on the cost side. As we mentioned, our headcount was down sequentially about 4%. Some of the benefits we will see related to those produced salary levels will start in fiscal Q4. What we have here in fiscal Q4 though is, there’s a couple of things that offset it just kind of temporarily. This quarter is to start over for our employer FICA related portion of the taxes. So, some of the savings we naturally would see this quarter are offset by some of the — just a calendar year payroll reset and last quarter was also our merit increase review for existing employees. So we had a little bit of bump up there. So, some of the muted impact does happen in Q4. But really, when I look out into fiscal ’24, that’s when we start to see the benefit, the benefit of that.

James Fish: Right.

Gary Merrill: So, go ahead.

James Fish: Towards fiscal ’24 rather than fiscal Q4.

Gary Merrill: Yes. So, I mean, you can big model out what you would expect in that fiscal ’24 perspective based on that 4% reduction. We’d expect to see those savings as we roll into fiscal ’24. As it relates to the building, it’s going to take one to two quarters to close. Jim, we have to go through some regulatory approval even with the state to get consent on a few things related to the building. So, therefore, we will see a modest kind of savings impact when we get into maybe the second quarter of fiscal ’24. It won’t be material but it will be modest. That will start to see some savings as well there.

Sanjay Mirchandani: On the quota-carrying, this is Sanjay. Jim, just to touch on that. The quota-carrying heads, we’re obviously very focused on making sure we don’t affect the top-line.

Gary Merrill: Yes. Nothing, Jim we’ve done will impact our outlook for fiscal ’24 and the top line. This is about efficiency across the business.