CommVault Systems, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended March 31, 2013. The filing also reports fiscal fourth-quarter results for the three months ended March 31, 2013; this is not a calendar-year 2012 Q4 filing.
Business context
CommVault sells Simpana data and information management software and related support and professional services. Its products cover backup and recovery, archiving, replication, search and analytics, built on a common software platform. At year-end it reported approximately 18,200 registered customers and operated in one reportable segment.
Financial performance
| Metric | FY2013 | FY2012 | Change |
|---|---|---|---|
| Revenue | $495.9 million | $406.6 million | +22% |
| Software revenue | $251.5 million | $201.8 million | +25% |
| Services revenue | $244.3 million | $204.8 million | +19% |
| Gross margin | $430.9 million; 86.9% | $353.2 million; 86.9% | Margin broadly flat |
| Operating income | $80.9 million; 16.3% margin | $49.3 million; 12.1% margin | +64% |
| Net income | $53.2 million | $31.9 million | +67% |
| Diluted EPS | $1.10 | $0.68 | +62% |
| Cash from operations | $112.7 million | $100.0 million | +13% |
Fiscal Q4 revenue was $138.3 million versus $114.0 million in the prior-year quarter; net income was $17.0 million versus $9.8 million. Services represented 49% of FY2013 revenue and software 51%. Software gross margin was 98.9%; services gross margin was 74.6%, down from 75.3% in FY2012.
Liquidity, debt and capital
Cash and cash equivalents were $434.0 million at March 31, 2013, up from $297.1 million a year earlier; short-term investments were $1.9 million. Working capital was $343.1 million. The balance sheet reports no borrowings or interest expense for FY2013. Total liabilities were $250.8 million, principally deferred revenue and accrued liabilities. Operating cash flow was supported by earnings, deferred service revenue and accrued liabilities, partly offset by higher receivables.
Investing cash outflow was $15.8 million, including $9.2 million for the planned headquarters campus and $7.8 million of other property and equipment purchases. The company estimated campus costs, including land and infrastructure, at $125–$135 million over approximately two years. No shares were repurchased in FY2013; $102.8 million remained authorized for repurchase through March 31, 2014. The company does not anticipate cash dividends in the foreseeable future.
Changes, outlook and key risks
- Growth was driven particularly by larger enterprise software transactions, which rose 35% and comprised 57% of software revenue, versus 52% in FY2012. International revenue grew 31%; international operations accounted for approximately 42% of revenue.
- Sales and marketing expense rose 13%, R&D rose 19%, and general and administrative expense rose 23%; expense growth was slower than revenue growth. R&D spending was $47.4 million. Stock-based compensation expense increased to $30.1 million.
- Simpana 10 became publicly available in February 2013. Management expected enterprise software transactions to increase during FY2014, while noting that the timing and size of individual deals are difficult to predict. The filing gives no numerical FY2014 revenue or earnings guidance.
- Revenue and receivables are concentrated in channel partners: Arrow represented approximately 29% of FY2013 revenue and 39% of year-end receivables; Dell represented approximately 20% of revenue and 23% of receivables. The filing describes dependence on resellers and OEM partners, competitive pressure, long and variable sales cycles, and customer spending and economic uncertainty as material risks.
- Other disclosed exposures include foreign exchange (management estimated a 10% change in foreign exchange rates would affect annual reported operating profit by approximately $6.7 million), tax examinations in the U.S. and Germany, and execution risk from planned information-systems upgrades. The company reported no pending legal matter believed likely to have a material adverse effect and no material off-balance-sheet financing arrangements.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective as of March 31, 2013.
Investor verification priorities
- Assess the sustainability and quality of growth in enterprise deals, software licenses and recurring customer-support revenue, including deferred revenue and renewal trends.
- Monitor Arrow and Dell concentration, related receivable collectability, and whether other channels can replace any lost partner business.
- Evaluate the $125–$135 million campus plan against cash generation, execution progress and potential cost overruns.
- Review stock-based compensation and dilution, tax-credit assumptions and ongoing IRS and German tax audits.
- Compare subsequent results with management’s qualitative FY2014 expectations; the filing provides no numerical full-year forecast.