While going through a transition period, data protection vendor Commvault’s sales are still taking a hit.
Commvault’s revenue for last quarter of $169.1 million fell $10 million below Wall Street expectations based on the vendor’s previous forecast. Overall revenue decreased four percent from the previous quarter and ticked up just one percent over the same quarter last year. Product revenue of $69.5 million decreased seven percent from the previous quarter and dropped three percent year-over-year.
Commvault did post an $891,000 profit after losing more than $1 million last year, but that was due largely to staff cuts and reduced spending. Commvault reduced its work force by around seven percent over the last six months, and finished September with 2,644 employees.
Commvault has failed to hit its revenue goals for four straight quarters. The company is searching for a new CEO to replace Bob Hammer, who is stepping down following criticism from activist investor Elliott Management earlier this year. It is also shifting to a subscription pricing model, and it revamped its product lineup this year to try to make it simpler to sell all its various data protection and management products. All of this is part of the Commvault Advance initiative adopted after Elliott’s stinging critique of company management. That includes a re-branding of products under a Commvault Complete program.
Hammer, who plans to remain on the Commvault board after he steps down as CEO, had little to say about the search for his replacement. He said the CEO search is “well under way. The search committee is making good progress.”
When an analyst on the call pressed him for more of an update, Hammer repeated “the search committee is making very good progress on the CEO search.”
Commvault never put a timeframe on its CEO search, but industry sources say the board hoped to have a replacement before this month’s Commvault GO user conference. Now, sources say, Commvault may not have a replacement for Hammer before the end of 2018.
Bill Wohl, Commvault’s chief communications officer, said the vendor never set a goal to have a new CEO by GO. Wohl also said Commvault Advance was planned long before management received Elliott’s letter, although the plan went into place several weeks after Elliott made the letter public.
“We are exactly where we planned to be as far as the CEO goes,” Wohl said.
Commvault’s transition comes as its largest rivals, Veritas and Dell EMC, come out of corporate restructuring of their own. Commvault also faces formidable well-funded startups Cohesity and Rubrik, and Veeam is making inroads in its move to the enterprise.
Commvault is going full speed ahead with its Commvault Advance and Commvault Complete programs, though. Hammer and CFO Brian Carolan frequently used the word “disruption” Tuesday on the company’s earnings call but claimed Commvault is headed in the right direction.
“While there was a higher level of disruption than we had anticipated, the most significant changes are now largely completed and we are focused on go-forward execution,” Hammer said.
Commvault executives spent much of the earnings call walking through the long-term financial benefits of moving to subscription pricing. They characterized subscription pricing as “repeatable” revenue compared to its historic perpetual licensing.
“While we are not satisfied with our revenue performance, we are seeing strong early momentum from our Commvault Advance initiatives, and are excited about our accelerating subscription revenue,” Hammer said.
Commvault forecasted approximately $181 million in revenue for this quarter and $189 million next quarter, putting its fiscal year total at $715 million. Those numbers are based on software sales of approximately $82 million this quarter and $86.5 million next quarter. Hammer characterized the guidance as a “conservative near-term outlook” and they represent modest year-over-year growth. He said Commvault’s goal is to grow revenue nine percent next year.
“The whole foundation of Commvault Complete was not to try to make band-aid changes,” Hammer said. “It makes fundamental changes in our products, pricing, routes to market, and a much more efficient cost structure. So internally, there is a lot of optimism. I really think we’ve done this the right way, although it had some intended risks as we made these massive changes.”