CommVault Announces Second Quarter Fiscal 2008 Financial Results

CommVault® (NASDAQ:CVLT) today announced its financial results for the second fiscal quarter ended September 30, 2007. N. Robert Hammer, CommVault’s chairman, president and CEO, stated, "CommVault had a very solid second quarter which was highlighted by record revenues and increased earnings. We continue to make significant progress in expanding our market positions in both our core backup and emerging products. The recent launch of CommVault Simpana 7.0 has improved the competitive differentiation of our current product lines which will enable us to continue to build our business around information management products and services.” Total revenues in the second quarter of fiscal 2008 were a record $47.4 million, an increase of 29% over the second quarter of fiscal 2007 and 8% over the prior quarter. Software revenue in the second quarter of fiscal 2008 was $26.6 million, up 31% year-over-year and 10% sequentially. Services revenue in the second quarter of fiscal 2008 was $20.9 million, up 27% year-over-year and 5% sequentially. Non-GAAP income from operations (EBIT) increased 32% to $7.0 million in the second quarter of fiscal 2008 compared to $5.3 million in the second quarter of the prior year. EBIT determined in accordance with U.S. GAAP was $4.7 million for the second quarter, a 21% increase from $3.8 million in the same period of the prior year. For the second quarter of fiscal 2008, non-GAAP net income increased 27% to $5.7 million, or $0.12 per diluted share, from $4.5 million or $0.12 per diluted share in the same period of the prior year. CommVault reported GAAP net income for the quarter of $3.4 million, a decrease of $1.0 million compared to the same period of the prior year. GAAP net income for the quarter ended September 30, 2007 includes an effective tax rate of 38% compared to an effective tax rate of 1% in the same period of the prior year. Operating cash flow totaled $4.5 million for the second quarter of fiscal 2008. Total cash and cash equivalents as of September 30, 2007 were $79.2 million. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Use of Non-GAAP Financial Measures.” Fiscal 2008 Guidance For the fiscal year ending March 31, 2008, CommVault currently expects: Total revenues in the range of $194 million to $196 million. Non-GAAP gross margins of 86.0% to 86.3%. Non-GAAP operating income margins of 17.2% to 17.7%. Non-GAAP diluted EPS in the range of $0.57 per share to $0.59 per share using an effective tax rate of approximately 28% and a weighted average diluted share count of approximately 45.6 million to 46.3 million. An actual cash tax rate in the mid to high single digits range based on current assumptions. The Non-GAAP diluted EPS guidance excludes approximately $0.13 per share to $0.15 per share of noncash stock-based compensation charges, net of non-GAAP income tax benefits of approximately $0.05 per share, and any additional FICA expense that will be incurred by CommVault when employees exercise in the money stock options. Use of Non-GAAP Financial Measures CommVault has provided in this press release selected financial information that has not been prepared in accordance with GAAP. CommVault uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, when used as a supplement to GAAP measures, in evaluating CommVault’s ongoing operational performance. CommVault believes that the use of these non-GAAP financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in CommVault’s industry, many of which present similar non-GAAP financial measures to the investment community. The non-GAAP financial results discussed above excludes noncash stock-based compensation charges, additional FICA expense incurred by CommVault when employees exercise in the money stock options and accretion of preferred stock dividends. In addition, the non-GAAP financial results apply an effective tax rate of 28% in fiscal 2008 and 25% starting in the second quarter of fiscal 2007 which resulted in an estimated effective tax rate of approximately 20% for fiscal 2007. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, which are provided in Table IV included in this press release. Conference Call Information CommVault will host a conference call today, October 30, 2007, at 5:00 p.m. EDT to discuss its financial results. To access this call, dial 800-561-2731 (domestic) or 617-614-3528 (international). Additionally, a live web cast of the conference call will be hosted under "Webcasts and Presentations” located under the "Investor Relations” section on CommVault’s Web site www.commvault.com. An archived web cast of this conference call will also be available on the "Investor Relations” section of CommVault’s Web site, www.commvault.com. About CommVault A singular vision - a belief in a better way to address current and future data management needs - guides CommVault in the development of Singular Information Management® solutions for high-performance data protection, universal availability and simplified management of data on complex storage networks. CommVault’s exclusive single-platform architecture gives companies unprecedented control over data growth, costs and risk. CommVault’s Simpana™ software suite of products was designed to work together seamlessly from the ground up, sharing a single code and common function set, to deliver superlative Data Protection, Archive, Replication, Search and Resource Management capabilities. More companies every day join those who have discovered the unparalleled efficiency, performance, reliability, and control only CommVault can offer. Information about CommVault is available at www.commvault.com. CommVault’s corporate headquarters is located in Oceanport, New Jersey, in the United States. (cvlt-f) Safe Harbor Statement This press release contains forward-looking statements, including statements regarding financial projections, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of software products and related services, general economic conditions and others. Statements regarding CommVault’s beliefs, plans, expectations or intentions regarding the future are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from anticipated results. CommVault does not undertake to update its forward-looking statements. ©1999 - 2007 CommVault Systems, Inc. All rights reserved. CommVault, CommVault and logo, the "CV” logo, CommVault Systems, Solving Forward, Simpana, SIM, Singular Information Management, CommVault Galaxy, Unified Data Management, QiNetix, Quick Recovery, QR, GridStor, Vault Tracker, Quick Snap, QSnap, Recovery Director, CommServe, and CommCell, are trademarks or registered trademarks of CommVault Systems, Inc. All other third-party brands, products, service names, trademarks, or registered service marks are the property of and used to identify the products or services of their respective owners. All specifications are subject to change without notice. Table I CommVault Systems, Inc.   Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)           Three Months EndedSeptember 30, Six Months EndedSeptember 30, 2007   2006 2007   2006   Revenues: Software $ 26,556 $ 20,260 $ 50,636 $ 39,048 Services   20,850     16,378     40,759     31,112   Total revenues 47,406 36,638 91,395 70,160   Cost of revenues: Software 542 391 1,003 663 Services   5,636     4,844     11,460     9,357   Total cost of revenues   6,178     5,235     12,463     10,020   Gross margin 41,228 31,403 78,932 60,140   Operating expenses: Sales and marketing 23,088 16,272 44,315 31,579 Research and development 6,667 6,100 13,126 11,518 General and administrative 6,098 4,611 11,256 9,264 Depreciation and amortization   723     582     1,422     1,079   Income from operations 4,652 3,838 8,813 6,700   Interest expense — (17 ) (114 ) (17 ) Interest income   886     676     1,703     1,200   Income before income taxes 5,538 4,497 10,402 7,883   Income tax expense   (2,100 )   (66 )   (3,985 )   (111 )   Net income 3,438 4,431 6,417 7,772   Less: accretion of preferred stock dividends — (1,407 ) — (2,818 ) Less: accretion of fair value of preferred stock upon conversion   —     (102,745 )   —     (102,745 ) Net income (loss) attributable to common stockholders $ 3,438   $ (99,721 ) $ 6,417   $ (97,791 )   Net income (loss) attributable to common stockholders per share: Basic $ 0.08   $ (4.90 ) $ 0.15   $ (4.96 ) Diluted $ 0.08   $ (4.90 ) $ 0.14   $ (4.96 )   Weighted average shares used in computing per share amounts: Basic   43,103     20,353     42,726     19,696   Diluted   45,677     20,353     45,321       19,696   Table II CommVault Systems, Inc.   Condensed Consolidated Balance Sheets (In thousands) (Unaudited)             September 30,2007 March 31,2007 Assets Current assets: Cash and cash equivalents $ 79,183 $ 65,001 Trade accounts receivable, net 30,820 22,044 Prepaid expenses and other current assets 4,538 3,657 Deferred tax assets   9,618   9,616 Total current assets 124,159 100,318   Property and equipment, net 5,077 4,624 Deferred tax assets, net 41,773 42,543 Other assets   1,008   554 Total assets $ 172,017 $ 148,039   Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 2,168 $ 1,500 Accrued liabilities 21,505 20,215 Term loan — 7,500 Deferred revenue   42,655   36,214 Total current liabilities 66,328 65,429   Deferred revenue, less current portion 5,420 4,284 Other liabilities 92 4   Total stockholders’ equity   100,177   78,322 $ 172,017 $ 148,039 Table III CommVault Systems, Inc.   Consolidated Statements of Cash Flows (In thousands) (Unaudited)     Six Months EndedSeptember 30, 2007   2006   Cash flows from operating activities Net income $ 6,417 $ 7,772 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,500 1,213 Noncash stock-based compensation 4,026 2,881 Excess tax benefits from stock-based compensation (2,486 ) — Deferred income taxes 356 —   Changes in operating assets and liabilities: Accounts receivable (8,268 ) 295 Prepaid expenses and other current assets (490 ) (224 ) Other assets (231 ) (200 ) Accounts payable 641 (230 ) Accrued liabilities 2,269 1,317 Deferred revenue and other liabilities   6,578     954   Net cash provided by operating activities 10,312 13,778   Cash flows from investing activities Purchase of property and equipment   (1,869 )   (2,247 ) Net cash used in investing activities (1,869 ) (2,247 )   Cash flows from financing activities Proceeds from the exercise of stock options 5,928 190 Net proceeds from follow-on public offering of common stock 4,315 — Excess tax benefits from stock-based compensation 2,486 — Repayments on term loan (7,500 ) (5,000 ) Proceeds from term loan — 15,000 Payments to Series A through E preferred stockholders upon conversion to common stock — (101,833 ) Net proceeds from initial public offering and concurrent private placement   —     82,494   Net cash provided by (used in) financing activities 5,229 (9,149 )   Effects of exchange rate — changes in cash   510     (257 )   Net increase in cash and cash equivalents 14,182 2,125 Cash and cash equivalents at beginning of period   65,001     48,039     Cash and cash equivalents at end of period $ 79,183   $ 50,164   Table IV CommVault Systems, Inc.   Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited)       Three Months EndedSeptember 30, Six Months EndedSeptember 30, 2007   2006 2007   2006 Non-GAAP financial measures and reconciliation: GAAP income from operations $ 4,652 $ 3,838 $ 8,813 $ 6,700 Noncash stock-based compensation (1) 2,213 1,484 4,026 2,881 FICA expense on stock option exercises (2)   145     —     392     —   Non-GAAP income from operations $ 7,010   $ 5,322   $ 13,231   $ 9,581     GAAP net income (loss) attributable to common stockholders $ 3,438 $ (99,721 ) $ 6,417 $ (97,791 ) Noncash stock-based compensation (1) 2,213 1,484 4,026 2,881 FICA expense on stock option exercises (2) 145 — 392 — Accretion of preferred stock dividends (3) — 1,407 — 2,818 Accretion of fair value of preferred stock upon conversion (4) — 102,745 — 102,745 Non-GAAP provision for income taxes adjustment (5)   (111 )   (1,429 )   (165 )   (1,429 ) Non-GAAP net income attributable to common stockholders $ 5,685   $ 4,486   $ 10,670   $ 9,224     GAAP diluted weighted average shares outstanding 45,677 20,353 45,321 19,696 Conversion of Series A through E preferred stock — 6,057 — 6,195 Conversion of Series AA, BB and CC preferred stock — 9,266 — 9,476 Dilutive effect of stock options and warrants   —     3,267     —     3,326   Non-GAAP diluted weighted average shares outstanding   45,677     38,943     45,321     38,693     Non-GAAP diluted net income per share $ 0.12   $ 0.12   $ 0.24   $ 0.24   Footnotes - Adjustments (1) Represents noncash stock-based compensation charges associated with stock options granted as follows: Three Months EndedSeptember 30,   Six Months EndedSeptember 30, 2007   2006 2007   2006   Cost of services revenue $ 42 $ 25 $ 75 $ 51 Sales and marketing 1,059 660 1,917 1,277 Research and development 323 195 580 382 General and administrative   789   604   1,454   1,171   Total noncash stock-based compensation expense $ 2,213 $ 1,484 $ 4,026 $ 2,881 (2) Represents additional FICA expenses incurred by CommVault when employees exercise in the money stock options. (3) Represents accretion of preferred stock dividends due on CommVault’s Series A through E cumulative redeemable convertible preferred stock prior to its conversion to common stock on September 27, 2006. (4) Represents accretion of fair value of Series A through E cumulative redeemable convertible preferred stock upon conversion to common stock on September 27, 2006. (5) The provision for income taxes is adjusted to reflect CommVault’s estimated non-GAAP effective tax rate of approximately 28% in fiscal 2008 and 25% starting in the second quarter of fiscal 2007 which resulted in an estimated effective tax rate of approximately 20% for fiscal 2007.